Exhibit 10.1


 


Execution Version


 


ASSET PURCHASE
AGREEMENT


 


BY AND AMONG


 


SYNNEX CORPORATION,
as Acquirer


 


JACK OF ALL GAMES,
INC., as US Seller


 


JACK OF ALL GAMES
(CANADA), INC., as Canadian Seller


 


and


 


TAKE-TWO INTERACTIVE
SOFTWARE, INC., as Guarantor


 


Dated as of December 21,
2009


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I.

  	
  PURCHASE & SALE OF PURCHASED
  ASSETS

  	
  2

  
	
   

  	
  Section 1.1

  	
  Purchased Assets

  	
  2

  
	
   

  	
  Section 1.2

  	
  No Other Assets

  	
  3

  
	
   

  	
  Section 1.3

  	
  Excluded Assets

  	
  4

  
	
   

  	
  Section 1.4

  	
  Liabilities

  	
  5

  
	
   

  	
  Section 1.5

  	
  Update to Schedules

  	
  6

  
	
   

  	
  Section 1.6

  	
  Purchase Price; Payment of Purchase Price

  	
  6

  
	
   

  	
  Section 1.7

  	
  Purchase Price Adjustments

  	
  6

  
	
   

  	
  Section 1.8

  	
  Purchase Price Allocation

  	
  11

  
	
   

  	
  Section 1.9

  	
  Closing

  	
  12

  
	
   

  	
  Section 1.10

  	
  Prorations

  	
  12

  
	
   

  	
  Section 1.11

  	
  Transfer Taxes

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II.

  	
  REPRESENTATIONS AND WARRANTIES OF THE
  SELLERS

  	
  13

  
	
   

  	
  Section 2.1

  	
  Organization and Qualification

  	
  13

  
	
   

  	
  Section 2.2

  	
  Authority Relative to this Agreement

  	
  13

  
	
   

  	
  Section 2.3

  	
  Equity Ownership

  	
  14

  
	
   

  	
  Section 2.4

  	
  Seller Financial Statements

  	
  14

  
	
   

  	
  Section 2.5

  	
  Books and Records; Organizational Documents

  	
  14

  
	
   

  	
  Section 2.6

  	
  No Undisclosed Liabilities

  	
  14

  
	
   

  	
  Section 2.7

  	
  Absence of Changes

  	
  14

  
	
   

  	
  Section 2.8

  	
  Real Property

  	
  16

  
	
   

  	
  Section 2.9

  	
  Valid Title/Sufficiency of Assets

  	
  16

  
	
   

  	
  Section 2.10

  	
  Intellectual Property

  	
  16

  
	
   

  	
  Section 2.11

  	
  Contracts

  	
  18

  
	
   

  	
  Section 2.12

  	
  Employees

  	
  21

  
	
   

  	
  Section 2.13

  	
  Compliance and Licenses

  	
  22

  
	
   

  	
  Section 2.14

  	
  Substantial Customers and Suppliers

  	
  23

  
	
   

  	
  Section 2.15

  	
  Accounts Receivable

  	
  23

  
	
   

  	
  Section 2.16

  	
  Inventory

  	
  24

  
	
   

  	
  Section 2.17

  	
  Approvals

  	
  24

  
	
   

  	
  Section 2.18

  	
  Tax

  	
  24

  
	
   

  	
  Section 2.19

  	
  Environmental Matters

  	
  25

  
	
   

  	
  Section 2.20

  	
  Absence of Litigation

  	
  25

  
	
   

  	
  Section 2.21

  	
  Export Control Laws

  	
  26

  
	
   

  	
  Section 2.22

  	
  Foreign Corrupt Practices Act

  	
  26

  
	
   

  	
  Section 2.23

  	
  Insurance Coverage

  	
  26

  
	
   

  	
  Section 2.24

  	
  Brokers or Finders

  	
  26

  
	
   

  	
  Section 2.25

  	
  Bankruptcy Matters

  	
  27

  
	
   

  	
  Section 2.26

  	
  No Conflict with Other Instruments

  	
  27

  
	
   

  	
  Section 2.27

  	
  Schedules

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III.

  	
  REPRESENTATIONS AND WARRANTIES OF ACQUIRER

  	
  27

  
						



 

















 


	
   

  	
  Section 3.1

  	
  Organization

  	
  27

  
	
   

  	
  Section 3.2

  	
  Authority

  	
  28

  
	
   

  	
  Section 3.3

  	
  No Conflict with Other Instruments

  	
  28

  
	
   

  	
  Section 3.4

  	
  Governmental Consents

  	
  28

  
	
   

  	
  Section 3.5

  	
  Software

  	
  28

  
	
   

  	
  Section 3.6

  	
  Brokers or Finders

  	
  29

  
	
   

  	
  Section 3.7

  	
  Purchase Price

  	
  29

  
	
   

  	
  Section 3.8

  	
  Investigation

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV.

  	
  CONDUCT PRIOR TO THE CLOSING DATE

  	
  29

  
	
   

  	
  Section 4.1

  	
  Conduct of Business of the Sellers

  	
  29

  
	
   

  	
  Section 4.2

  	
  Conduct of the Business of the Acquirer

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V.

  	
  ADDITIONAL AGREEMENTS

  	
  31

  
	
   

  	
  Section 5.1

  	
  Access to Information

  	
  31

  
	
   

  	
  Section 5.2

  	
  Confidentiality

  	
  32

  
	
   

  	
  Section 5.3

  	
  Approvals

  	
  32

  
	
   

  	
  Section 5.4

  	
  Termination of Security Interest

  	
  32

  
	
   

  	
  Section 5.5

  	
  Notification of Certain Matters

  	
  32

  
	
   

  	
  Section 5.6

  	
  Expenses

  	
  32

  
	
   

  	
  Section 5.7

  	
  Public Disclosure

  	
  32

  
	
   

  	
  Section 5.8

  	
  Takeover Statutes

  	
  33

  
	
   

  	
  Section 5.9

  	
  Seller Dissolution

  	
  33

  
	
   

  	
  Section 5.10

  	
  Preservation of Books and Records

  	
  33

  
	
   

  	
  Section 5.11

  	
  Employee Matters

  	
  33

  
	
   

  	
  Section 5.12

  	
  Financial Statements

  	
  36

  
	
   

  	
  Section 5.13

  	
  Maintenance of Existence; Adequate Funds

  	
  36

  
	
   

  	
  Section 5.14

  	
  Release of Guaranties

  	
  36

  
	
   

  	
  Section 5.15

  	
  Electronic Data

  	
  36

  
	
   

  	
  Section 5.16

  	
  Debit Memos

  	
  36

  
	
   

  	
  Section 5.17

  	
  Excluded Inventory

  	
  37

  
	
   

  	
  Section 5.18

  	
  Customers and Vendors

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI.

  	
  SURVIVAL OF REPRESENTATIONS, WARRANTIES,
  COVENANTS AND AGREEMENTS; INDEMNIFICATION PROVISIONS

  	
  37

  
	
   

  	
  Section 6.1

  	
  Survival of Representations, Warranties,
  Covenants and Agreements

  	
  37

  
	
   

  	
  Section 6.2

  	
  Indemnification Provisions

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII.

  	
  CONDITIONS TO THE CLOSING

  	
  41

  
	
   

  	
  Section 7.1

  	
  Conditions to Obligations of Each Party to
  Effect the Closing

  	
  41

  
	
   

  	
  Section 7.2

  	
  Additional Conditions to Obligations of the
  Sellers

  	
  42

  
	
   

  	
  Section 7.3

  	
  Additional Conditions to the Obligations of
  the Acquirer

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII.

  	
  TERMINATION, AMENDMENT AND WAIVER

  	
  43

  
	
   

  	
  Section 8.1

  	
  Termination

  	
  43

  
	
   

  	
  Section 8.2

  	
  Notice; Effect of Termination

  	
  44

  
	
   

  	
  Section 8.3

  	
  Amendment

  	
  45

  
					



 


ii

















 


	
   

  	
  Section 8.4

  	
  Extension; Waiver

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX.

  	
  MISCELLANEOUS PROVISIONS

  	
  45

  
	
   

  	
  Section 9.1

  	
  Notices

  	
  45

  
	
   

  	
  Section 9.2

  	
  Guaranty

  	
  46

  
	
   

  	
  Section 9.3

  	
  Entire Agreement

  	
  47

  
	
   

  	
  Section 9.4

  	
  Further Assurances; Post-Closing
  Cooperation

  	
  47

  
	
   

  	
  Section 9.5

  	
  Remedies

  	
  47

  
	
   

  	
  Section 9.6

  	
  Third Party Beneficiaries

  	
  47

  
	
   

  	
  Section 9.7

  	
  Invalid Provisions

  	
  47

  
	
   

  	
  Section 9.8

  	
  Disclosure Schedule

  	
  47

  
	
   

  	
  Section 9.9

  	
  Governing Law

  	
  48

  
	
   

  	
  Section 9.10

  	
  Dispute Resolution

  	
  48

  
	
   

  	
  Section 9.11

  	
  Headings

  	
  49

  
	
   

  	
  Section 9.12

  	
  Counterparts

  	
  49

  
	
   

  	
  Section 9.13

  	
  Specific Performance

  	
  49

  
	
   

  	
  Section 9.14

  	
  Assignment

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X.

  	
  DEFINITIONS

  	
  50

  
	
   

  	
  Section 10.1

  	
  Definitions

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Assignment and Assumption Agreement

  	
   

  
	
  Exhibit B-1

  	
  Form of Acquirer Officers’ Certificate

  	
   

  
	
  Exhibit B-2

  	
  Form of Acquirer Secretary’s Certificate

  	
   

  
	
  Exhibit C-1

  	
  Form of the Sellers Officers’ Certificate

  	
   

  
	
  Exhibit C-2

  	
  Form of the Sellers Secretary’s Certificate

  	
   

  
	
  Exhibit D

  	
  Form of Bill of Sale

  	
   

  
						



 


iii
















 


ASSET PURCHASE AGREEMENT


 


THIS ASSET PURCHASE AGREEMENT is made and entered
into as of December 21, 2009, by and among SYNNEX CORPORATION, a Delaware
corporation (“Acquirer”), JACK OF ALL GAMES, INC., a New York
corporation (the “US Seller”), JACK OF ALL GAMES (CANADA), INC., an
Ontario corporation (the “Canadian Seller” and, together with US Seller,
the “Sellers”), and, solely for purposes of Section 9.2,
TAKE-TWO INTERACTIVE SOFTWARE, INC., a Delaware corporation (“Guarantor”).  Capitalized terms used and not otherwise
defined herein have the meanings set forth in Article X.


 


RECITALS:


 


WHEREAS, US Seller is in the business of
distributing video and computer games and other software, hardware and
accessories designed for video game consoles, personal computers and handheld
platforms to retail outlets throughout the United States (the “US Business”);


 


WHEREAS, Canadian Seller is in the business of
distributing video and computer games and other software, hardware and
accessories designed for video game consoles, personal computers and handheld
platforms to retail outlets throughout Canada (the “Canadian Business”
and, together with the US Business, the “Business”);


 


WHEREAS, subject to the terms and conditions set
forth herein, the Sellers desire to sell, convey, transfer, assign and deliver
to Acquirer, and Acquirer desires to purchase and acquire from the Sellers, all
of the Sellers’ right, title and interest in and to all of the Purchased Assets
including the assumption of the Assumed Liabilities (the “Acquisition”);


 


WHEREAS, Guarantor will obtain substantial direct
and indirect benefits from the transactions contemplated herein and, as an
essential inducement of and condition to such transactions and in consideration
therefor, Guarantor has agreed to guarantee fully the performance of the
Sellers, as further described in Section 9.2;


 


WHEREAS, in connection with the transactions
contemplated by this Agreement, the Sellers and Acquirer have executed and
delivered, as of the date hereof, (i) an agreement for transition services
(the “Transition Services Agreement”), (ii) a distribution
agreement (the “Distribution Agreement”), (iii) a sublease for the
Subleased Property (the “Sublease”), (iv) assignments of trademarks
by means of a trademark assignment agreement (the “Trademark Assignment”),
and (v) assignment of a domain name by means of a domain name assignment
(the “Domain Name Assignment”), each of which shall become effective
upon the Closing; and


 


WHEREAS, in connection with the transactions
contemplated by this Agreement, the Sellers have obtained consents,
assignments, approvals and waivers from certain of their customers and vendors,
copies of which are set forth on Section 1 of the Disclosure Schedule (the
“Consents”).


 


NOW, THEREFORE, in consideration of the covenants,
promises, representations and warranties set forth herein, and for other good
and valuable consideration 


 

















 


(the receipt and sufficiency
of which are hereby acknowledged by the parties), intending to be legally bound
hereby, the parties hereby agree as follows:


 


ARTICLE I.




PURCHASE & SALE OF PURCHASED ASSETS


 


Section 1.1                                      Purchased Assets.  Subject to the terms and conditions of this
Agreement, including Section 1.2(b), and in reliance upon the
representations, warranties, covenants and agreements contained herein, at the
Closing, the Sellers shall sell, convey, transfer, assign and deliver to
Acquirer, and Acquirer shall purchase and acquire from the Sellers, free and
clear of all Liens (other than Permitted Liens), all of the Sellers’ right,
title and interest in and to all of the assets which the Sellers own or in
which either of the Sellers has any right, title or interest relating to the
Business, including, but not limited to, the assets listed below except as set
forth in Sections 1.2 and 1.3 (collectively, the “Purchased
Assets”):


 


(a)                                  all accounts receivable,
notes receivable and other receivables, including, but not limited to, those
receivables set forth on Section 1.1(a) of the Disclosure Schedule;


 


(b)                                 all inventories and works-in-progress,
and all rights to collect from customers (and to retain) all fees and other
amounts payable, or that may become payable, to the Sellers with respect to
services performed by the Sellers on or prior to the Closing Date including,
but not limited to, those inventories, works-in-progress, rights, and fees set
forth on Section 1.1(b) of the Disclosure Schedule;


 


(c)                                  all equipment, computers,
materials, prototypes, tools, supplies, vehicles, furniture, fixtures,
improvements and other tangible assets related to the Business, except as set
forth on Section 1.1(c) of the Disclosure Schedule;


 


(d)                                 all Intellectual Property
used by Sellers in the operation of the Business;


 


(e)                                  all advertising and
promotional materials;


 


(f)                                    all right, title and interest
in, to and under the Contracts set forth on Section 1.1(f) of the
Disclosure Schedule;


 


(g)                                 to the extent permitted by
applicable Law, all Permits necessary for the conduct of the Business;


 


(h)                                 to the extent permitted by
applicable Law, and subject to Section 9.4, all books, records,
files and data;


 


(i)                                     the rights under Sellers’
Insurance Policies with respect to the accounts receivable as of the Closing
that are not excluded by Sellers pursuant to Section 1.2(b) (the
“Transferred Insurance Policies”);


 


(j)                                     all goodwill incident to the
items listed above;


 


2





















 


(k)                                  all readily available
electronic data relating to the Business (including data dating back to December 2002
and excluding all information relating to employees that are not Transferred
Employees) other than Personal Information, and all data in all computers
included in the Purchased Assets existing as of the Closing Date other than
Personal Information;


 


(l)                                     all assets included in the
computation of Tangible Net Worth; and


 


(m)                               all other assets principally
used in the operation of the Business (but not including any Excluded Assets).


 


Section 1.2                                      No Other Assets.


 


(a)                                  The Sellers shall retain,
and Acquirer shall not purchase, any assets, properties, rights or interests of
the Sellers other than the Purchased Assets.


 


(b)                                 Notwithstanding anything to
the contrary contained in this Agreement, but subject to the last sentence of
this Section 1.2(b), if by virtue of the amount of accounts
receivable included in the Purchased Assets at the Closing the Tangible Net
Worth exceeds Thirty-Five Million Dollars ($35,000,000), then the Sellers shall
have the right, in their sole discretion, to specifically exclude any of the
Sellers’ accounts receivable, in an aggregate amount necessary to reduce the
Tangible Net Worth to not less than Thirty-Five Million Dollars ($35,000,000),
as the Sellers shall specify in a written notice to Acquirer at least five (5) Business
Days prior to the Closing, whereupon such accounts receivable shall, to the
extent excluded, cease to be “Purchased Assets” hereunder and shall
become “Excluded Assets” and thereby be excluded from the Purchased
Assets.  Notwithstanding the foregoing,
if the Sellers exclude any accounts receivable pursuant to this Section 1.2(b),
the average past-due age and collectability of the accounts receivable which
remain Purchased Assets shall not be adversely impacted as a result of such
exclusion.


 


(c)                                  At least five (5) Business
Days prior to Closing the Sellers shall deliver a written notice to Acquirer
specifying all inventory (including the age and value thereof (calculated in
accordance with the Accounting Procedures excluding any discount that may be
applied to such value)) to be included in the Purchased Assets and the Sellers’
calculation of the Excess Inventory Value and the Aged Excess Inventory
Value.  In the event that (A) the
Excess Inventory Value is in excess of Three Million Three Hundred Thousand
Dollars ($3,300,000), then the Acquirer may elect to exclude inventory from the
Purchased Assets, as the Acquirers shall specify in a written notice to the
Sellers at least two (2) Business Days prior to the Closing, such that the
Excess Inventory Value at the Closing shall equal approximately Three Million
Three Hundred Thousand Dollars ($3,300,000) or (B) the Aged Excess
Inventory Value is in excess of Eight Hundred Thousand Dollars ($800,000), then
the Acquirer may elect to exclude inventory Aged more than 180 days from the
Purchased Assets, as the Acquirer shall specify in a written notice to the
Sellers at least two (2) Business Days prior to the Closing, such that the
Aged Excess Inventory Value at the Closing shall equal approximately Eight
Hundred Thousand Dollars ($800,000), whereupon such excluded inventory shall,
to the extent excluded pursuant to clause (A) or (B), cease to be “Purchased
Assets” hereunder and shall become “Excluded Assets” and thereby be
excluded from the Purchased Assets and shall be referred to herein as “Excluded
Inventory”.


 


3





















 


Section 1.3                                      Excluded Assets.  The Sellers shall not sell, convey, transfer
or assign to Acquirer, and Acquirer shall not purchase or acquire any of the
following assets, or any right, title or interest therein (collectively, the “Excluded
Assets”):


 


(a)                                  Cash Assets;


 


(b)                                 claims for and rights to
receive refunds, rebates, or similar payments of Taxes for any Pre-Closing Tax
Period, all Tax Returns and all notes, worksheets, files or documents relating
thereto; provided, however,
that copies of the foregoing, to the extent related to the Business or the
Purchased Assets, shall be delivered to Acquirer;


 


(c)                                  minute books and corporate
records of the Sellers;


 


(d)                                 personnel, employee
compensation, medical and benefits and labor relations records relating to
employees or past employees of the Sellers other than such records relating
exclusively to the Transferred Employees;


 


(e)                                  the Sellers’ Insurance
Policies and rights therein (other than the Transferred Insurance Policies);


 


(f)                                    all equipment, materials,
prototypes, tools, supplies, vehicles, furniture, fixtures, improvements and
other tangible assets located on the first floor of 9271 Meridian Way, West
Chester, Ohio, 45069, except as otherwise provided in Section 1.1(c) or
Section 1.3(f) of the Disclosure Schedule;


 


(g)                                 all computer software set
forth on Section 1.3(g) of the Disclosure Schedule;


 


(h)                                 all right, title and
interest in, to and under all Contracts and Plans set forth on Section 1.3(h) of
the Disclosure Schedule (the “Excluded Contracts”);


 


(i)                                     all insurance proceeds
receivable by the Sellers, the Guarantor or any Affiliate thereof relating to
any Excluded Asset;


 


(j)                                     security deposits under all
Lease Documents;


 


(k)                                  all proceeds receivable by
the Sellers relating to products purchased from any Seller or one of its
distributors by the employees of the Sellers, the Guarantor or any Affiliate
thereof pursuant to an employee product discount program;


 


(l)                                     assets set forth on Section 1.3(l) of
the Disclosure Schedule;


 


(m)                               all rights of the Sellers
under this Agreement and the Ancillary Agreements, or any other agreement
between either Seller and the Acquirer;


 


(n)                                 any assets owned by
Guarantor or any Affiliates of Sellers;


 


(o)                                 all Personal Information;


 


4





















 


(p)                                 all accounts receivable,
notes receivable and other receivables of the Canadian Seller or related to the
Canadian Business;


 


(q)                                 all accounts receivable,
notes receivable and other receivables of the US Seller relating to its third
party PC distribution business;


 


(r)                                    all returns of inventory
occurring after the Closing relating to the Canadian Seller, the Canadian
Business or the US Seller’s third party PC distribution business;


 


(s)                                  any accounts receivable or
Excess Inventory excluded from the Purchased Assets pursuant to Section 1.2(b) and
1.2(c), respectively; and


 


(t)                                    any assets of Guarantor
and/or Ditan Distribution LLC related to the Inventory Management Services
Agreement by any among Ditan Distribution LLC, Guarantor and US Seller.


 


Section 1.4                                      Liabilities.


 


(a)                                  Assumed Liabilities.  Subject to the terms and conditions set forth
in this Agreement and in reliance upon the representations, warranties,
covenants and conditions herein contained, on the Closing Date, Acquirer shall
assume and agree to pay, perform or otherwise discharge when due, without
recourse to the Sellers or their respective Affiliates, the following
Liabilities, and only the following Liabilities, of the Sellers (collectively the
“Assumed Liabilities”):


 


(i)                                     Liabilities
relating to the conduct of the Business after the Closing Date under the
Contracts listed on Section 1.4(a)(i) of the Disclosure Schedule and
Permits (to the extent such Permit is a Purchased Asset);


 


(ii)                                  all Current
Liabilities included in the computation of Tangible Net Worth, calculated in
accordance with the Accounting Procedures and on a basis consistent with Section 1.7(a)(i) of
the Disclosure Schedule which includes an example of the calculation of Tangible
Net Worth as of October 31, 2009;


 


(iii)                               Liabilities to
or with respect to Transferred Employees relating to their employment after the
Closing Date, including, without limitation, any amounts due or payable after
the Closing Date pursuant to applicable Law or any Plan applicable to or
involving a Transferred Employee or any severance or termination payment
arising after the Closing Date but excluding any obligations arising due to the
Closing of the Acquisition; and


 


(iv)                              all other
Liabilities arising out of the conduct by Acquirer with respect to the Business
or the ownership or operation by Acquirer of the Purchased Assets, in each
case, from and after the Closing Date.


 


(b)                                 Excluded Liabilities.  Notwithstanding anything herein to the
contrary, except for the Assumed Liabilities, Acquirer shall not assume or
otherwise be liable for Liabilities of the Sellers or any other Person of any
kind, character or description, whether 


 


5





















 


accrued, absolute, contingent or otherwise (the “Excluded
Liabilities”), including, but not limited to, any Liabilities arising out
of or with respect to the Excluded Assets, including, but not limited to, the
liabilities set forth on Section 1.4(b) of the Disclosure Schedule.


 


Section 1.5                                      Update to Schedules.  At least five (5) Business Days prior to
the Closing, Sellers shall provide Acquirer with updates to Sections 1.1(a),
1.1(b), and 1.4(a) of the Disclosure Schedule.


 


Section 1.6                                      Purchase Price; Payment of
Purchase Price.


 


(a)                                  Total Consideration.  Subject to the terms and conditions of this
Agreement, the aggregate consideration for the Purchased Assets shall be equal
to the sum of the Closing Payment, the Subsequent Payments and the Earn-Out
Payment (the “Purchase Price”).  The
Purchase Price shall be allocated among the US Seller and the Canadian Seller
in accordance with Section 1.8.


 


(b)                                 Closing Payment.  At the Closing, Acquirer shall (i) pay
the Sellers Thirty-Six Million Five Hundred Dollars ($36,500,000) (the “Closing
Payment”), subject to adjustment as set forth in Section 1.7(a)(i),
by wire transfer of immediately available funds to account(s) specified by
the Sellers and (ii) assume the Assumed Liabilities pursuant to the
Assignment and Assumption Agreement attached hereto as Exhibit A.


 


(c)                                  Subsequent Payments.


 


(i)                                     In accordance
with Section 1.7(b)(i), within two Business Days either before or
after the date that is one hundred ninety (190) days following the Closing Date
(the “Subsequent Payment Date”), Acquirer shall pay the Sellers Three
Million Five Hundred Thousand Dollars ($3,500,000), subject to reduction as set
forth in Section 1.7(b)(i) (the “First Subsequent Payment”),
by wire transfer of immediately available funds to an account(s) specified
by the Sellers.


 


(ii)                                  In accordance
with Section 1.7(b)(ii), within two Business Days either before or
after the Subsequent Payment Date, Acquirer shall pay the Sellers Three Million
Dollars ($3,000,000), subject to reduction as set forth in Section 1.7(b)(ii) (the
“Second Subsequent Payment” and, together with the First Subsequent
Payment, the “Subsequent Payments”), by wire transfer of immediately
available funds to an account(s) specified by the Sellers.


 


(iii)                               In accordance
with Section 1.7(b)(iii), if and only if there is an Earn-Out
Realization Event, no later than the date fifteen (15) Business Days after October 31,
2010 (such date, the “Earn-Out Payment Date”), Acquirer shall pay the
Sellers Two Hundred Fifty Thousand Dollars ($250,000), subject to adjustment as
set forth in Section 1.7(b)(iii) (the “Earn-Out Payment”),
by wire transfer of immediately available funds to an account(s) specified
by the Sellers.


 


Section 1.7                                      Purchase Price Adjustments.


 


(a)                                  The Purchase Price shall be
adjusted as follows:


 


6





















 


(i)                                     No later than
five (5) Business Days and not more than ten (10) Business Days prior
to the anticipated Closing Date, (x) the Sellers shall prepare and deliver
to Acquirer a written estimate of the Tangible Net Worth of the Business as of
the Closing Date (the “Estimated Tangible Net Worth”), determined in
accordance with the Accounting Procedures, and shall provide a schedule of
accounts receivable (including reserves taken in connection therewith) included
within the calculation of the Estimated Tangible Net Worth and (y) at the
same time, the Sellers shall prepare and deliver to Acquirer a written estimate
of the Current Inventory Adjustment Amount (the “Estimated Current Inventory
Adjustment Amount”).  For all purposes
of this Section 1.7(a), Tangible Net Worth shall be calculated in
accordance with the Accounting Procedures and Section 1.7(a)(i) of
the Disclosure Schedule which Section 1.7(a)(i) of the
Disclosure Schedule includes an example of the calculation of Tangible Net
Worth as of October 31, 2009, and is provided for illustrative purposes
only; provided, however, in the event of an inconsistency between the
Accounting Procedures and any exemplar in the Disclosure Schedule, the
Accounting Procedures shall prevail.  To
the extent the Estimated Tangible Net Worth is less than Thirty-Five Million
Dollars ($35,000,000) (the “Target Tangible Net Worth”), or the
Estimated Current Inventory Adjustment Amount is greater than zero, then the
Closing Payment shall be reduced dollar for dollar for the amount of such
shortfall and/or Estimated Current Inventory Adjustment Amount.  If the Estimated Tangible Net Worth is
greater than the Target Tangible Net Worth, the Closing Payment shall be
increased dollar for dollar for the amount of such surplus, but reduced by any
Estimated Current Inventory Adjustment Amount greater than zero; provided that
in no event shall the Closing Payment be increased by more than Four Million
Dollars ($4,000,000) (the “Purchase Price Adjustment”) pursuant to this Section 1.7(a)(i).


 


(ii)                                  As promptly as
reasonably practicable after the Closing Date, but not later than one hundred
eighty (180) calendar days after the Closing Date, Acquirer will, or will cause
its independent accounting firm to, prepare and deliver to the Sellers a
statement (the “Statement”) setting forth any disagreements with the
Estimated Tangible Net Worth as reported by Sellers (the “Post-Closing
Tangible Net Worth Statement”), determined in accordance with the
Accounting Procedures and Section 1.7(a)(i) of the Disclosure
Schedule, or any disagreements with the Estimated Current Inventory Adjustment
Amount as reported by Sellers.


 


(iii)                               If the Sellers
have any objections to the calculation of the Closing Date Tangible Net Worth
or the Estimated Current Inventory Adjustment Amount as set forth on the
Statement, the Sellers will deliver a detailed statement (the “Statement of
Objections”) describing the Sellers’ objections to Acquirer within thirty
(30) calendar days of the Sellers’ receipt of the Statement from Acquirer (the “Notice
Period”); provided that the Notice Period shall be appropriately extended
beyond thirty (30) calendar days to the extent the Sellers reasonably request
further information or clarification regarding the Post-Closing Tangible Net
Worth Statement and/or the Acquirer’s disagreements with the Estimated Current
Inventory Adjustment Amount and the Acquirer has failed to provide a reasonably
responsive reply by the earlier of:  (A) the
date that is two (2) Business Days after the date of any such request or (B) the
date that is three (3) Business Days prior to the expiration of the Notice
Period.  If the Sellers fail to notify
Acquirer of any such objections within the Notice Period, the Post-Closing 


 


7





















 


Tangible Net Worth Statement
delivered by Acquirer to the Sellers will be deemed to be the “Final
Statement”, and the Estimated Current Inventory Adjustment Amount
determined by Acquirer will be deemed to be the “Final Current Inventory
Adjustment Amount”.  The Sellers and
Acquirer will use their reasonable best efforts to resolve any such objections.


 


(iv)                              If a final
resolution is not obtained within thirty (30) calendar days after Acquirer has
received the Statement of Objections, either party may refer the dispute to
Deloitte & Touche LLP (such accounting firm, the “Accounting
Referee”) for binding resolution, determined in accordance with the
Accounting Procedures.  Except as set
forth on Section 1.7(a)(iv) of the Disclosure Schedule, since January 1,
2009 neither the Guarantor, Acquirer nor any of their respective controlled
Affiliates has conducted any business with the Accounting Referee.  The Accounting Referee will address only
items disputed by the parties, and may not assign to any such disputed item a
value that is greater than the greatest amount for such item that is claimed by
a party or less than the smallest amount claimed by a party.  Each party will cooperate with the Accounting
Referee and provide the Accounting Referee with any information requested by
it.  The Accounting Referee shall
concurrently deliver to the Sellers and Acquirer a written opinion setting
forth a final determination of the value of the disputed item(s), which
determination will be final and binding on all parties.


 


(v)                                 Acquirer will
revise the Post-Closing Tangible Net Worth Statement, or the calculation of the
Estimated Current Inventory Adjustment Amount, as appropriate to reflect the
resolution of the Sellers’ objections (as agreed upon by the Sellers and
Acquirer or as determined by the Accounting Referee) and deliver it to the
Sellers within five (5) Business Days after the resolution of such
objections.  Such revised Statement will
be the “Final Statement” or such revised Estimated Current Inventory
Adjustment Amount will be the “Final Current Inventory Adjustment Amount”.  The Tangible Net Worth of the Business set
forth on the Final Statement will be the “Final Tangible Net Worth.”


 


(vi)                              In the event
the Final Tangible Net Worth is less than the Estimated Tangible Net Worth, or
the Final Current Inventory Adjustment Amount is greater than the Estimated
Current Inventory Adjustment Amount, the Sellers shall pay the aggregate
difference to the Acquirer.  In the event
the Final Tangible Net Worth is greater than the Estimated Tangible Net Worth,
or the Final Current Inventory Adjustment Amount is less than the Estimated
Current Inventory Adjustment Amount, the Acquirer shall pay the aggregate
difference to the Sellers; provided, however, that in no event shall the total of the Closing
Payment plus any additional amounts paid by Acquirer under this Section 1.7(a)(vi) exceed
Forty Million Five Hundred Thousand Dollars ($40,500,000).  All payments under this Section 1.7(a)(vi) shall
be made within five (5) Business Days of determination of the Final
Tangible Net Worth and/or Final Current Inventory Adjustment Amount and shall
be paid by wire transfer of immediately available fund to an account(s) specified
by the Sellers or Acquirer, as applicable.


 


(vii)                           Except as
provided in Section 1.7(a)(viii), Acquirer and the Sellers shall
bear equally the fees and expenses of the Accounting Referee.


 


8





















 


(viii)                        The Accounting
Referee shall be required by the parties to determine the party (i.e., Acquirer
or the Sellers) whose asserted position as to the calculation of Closing Date
Tangible Net Worth is furthest from the determination by the Accounting Referee
and such party shall be deemed to be the “non-prevailing party.”  Notwithstanding the provisions set forth in Section 1.7(a)(vii),
if Acquirer is the non-prevailing party and its asserted position was lower by
10% or more of the Final Tangible Net Worth as determined by the Accounting
Referee, Acquirer will pay all of the fees and expenses of the Accounting
Referee.  If the Sellers are the
non-prevailing party and their asserted position was higher by 10% or more of
the Final Tangible Net Worth as determined by the Accounting Referee, the Sellers
will pay all of the fees and expenses of the Accounting Referee.


 


(ix)                                Each party will
(A) provide the other party and its representatives with full access
during customary business hours to those books, records and employees that are
related to the preparation of Closing Date Tangible Net Worth and/or Current
Inventory Adjustment Amount and (B) fully cooperate with all reasonable
requests by a party in connection with a party’s review of the Closing Date
Tangible Net Worth, the Post-Closing Tangible Net Worth Statement, the
Statement of Objections and/or Current Inventory Adjustment Amount.  Acquirer and the Sellers will make available
to the other party and its representatives (including auditors) any back-up
materials generated by them to support a position which is contrary to the
position taken by the other party.


 


(x)                                   From and after
the Closing and prior to the Subsequent Payment Date, the Acquirer shall (i) use
commercially reasonable efforts to pursue the collection of all accounts
receivable included within the Purchased Assets, (ii) sell inventory
included in the Purchased Assets in the Acquirer’s ordinary course of business
and (iii) not scrap or destroy any inventory included in the Purchased
Assets.


 


(b)                                 The Subsequent Payments and
Earn-Out Payment shall be adjusted as follows:


 


(i)                                     Ten (10) days
prior to the Subsequent Payment Date, Acquirer will prepare and deliver to the
Sellers a statement indicating (i) the aggregate amount as of the
Subsequent Payment Date by which (A) actual claims, chargebacks,
discounts, setoffs, returns or allowances as of the Subsequent Payment Date
made by customers relating to any item included within the Final Tangible Net
Worth, if available, or, if not available, within the Estimated Tangible Net
Worth as of the Closing exceeds (B) the aggregate reserve amount for such
items included within the Final Tangible Net Worth, if available at such time,
or, if not available, within the Estimated Tangible Net Worth as of the
Closing, (ii) the aggregate amount as of the Subsequent Payment Date of
any accounts receivable, included within the Final Tangible Net Worth, if
available at such time, or, if not available, within the Estimated Tangible Net
Worth as of the Closing, that are Uncollectible, (iii) the aggregate
amount as of the Subsequent Payment Date of any Unresolved Debit Memos and
related clearing account items and (iv) shortfalls as of the Subsequent
Payment Date in any other category of asset (other than inventory) purchased or
excesses over liabilities assumed.  The
aggregate sum of (i)-(iv) set forth in the immediately preceding sentence,
less 50% of the excess, if any, of actual inventory 


 


9





















 


included in the Purchased
Assets returned by customers to Acquirer (based on Seller’s average historical
value) over the gross value of estimated return inventories included in the
Estimated Tangible Net Worth or the Final Tangible Net Worth, as the case may,
less any insurance payments received by Acquirer under the Transferred
Insurance Policies prior to the Subsequent Payment Date relating to an
Uncollected Amount or Excluded Asset and not otherwise remitted to Sellers,
shall be referred to as the “Uncollected Amount”.  Notwithstanding the actual calculation of the
Uncollected Amount, in no event shall the Uncollected Amount exceed Three
Million Five Hundred Thousand Dollars ($3,500,000).  The First Subsequent Payment will be reduced
by an amount equal to the Uncollected Amount; provided,
however, that in no event shall the First
Subsequent Payment be reduced below zero. 
On the Subsequent Payment Date, Acquirer shall pay the Sellers the First
Subsequent Payment, as reduced pursuant to this Section 1.7(b)(i),
by wire transfer of immediately available funds to an account(s) specified
by the Sellers.  In the event Acquirer
receives insurance payments under the Transferred Insurance Policies after the
Subsequent Payment Date relating to an Uncollected Amount or an Excluded Asset,
such amounts shall promptly be remitted to Sellers.  In the event that the Estimated Tangible Net
Worth as of the Closing Date is used to calculate the Uncollected Amount, any
amounts included in the calculation of the Uncollected Amount shall not be
permitted to be used to reduce the corresponding line item in the Final
Tangible Net Worth.


 


(ii)                                  Ten (10) days
prior to the Subsequent Payment Date, Acquirer will prepare and deliver to the
Sellers a statement indicating the excess, if any, of (x) the Net
Inventory at Time of Close, less (y) the Net LCM Value of Close Date
Inventory (the “Inventory Excess”). 
The Second Subsequent Payment will be reduced by an amount equal to the
Inventory Excess; provided, however,
that in no event shall the Second Subsequent Payment be reduced below
zero.  On the Subsequent Payment Date,
Acquirer shall pay the Sellers the Second Subsequent Payment, as reduced
pursuant to this Section 1.7(b)(ii), by wire transfer of
immediately available funds to an account(s) specified by the Sellers.


 


(iii)                               No later than
ten (10) Business Days after October 31, 2010, Acquirer will prepare
and deliver to the Sellers a statement indicating the Gross Revenues received
from sales of the Take-Two Products by Sellers (prior to the Closing Date) or
Acquirer (following the Closing Date), as applicable, from November 1,
2009 through and including October 31, 2010 (“Take-Two Product Revenues”).  If the Take-Two Product Revenues are greater
than Forty-Eight Million Dollars ($48,000,000) (an “Earn-Out Realization
Event”), Acquirer shall pay the Sellers the Earn-Out Payment in accordance
with Section 1.6(c)(iii).


 


(iv)                              If the Sellers
have any objections to the calculation of the Uncollected Amount, Inventory
Excess or Take-Two Product Revenues, the Sellers will deliver a detailed
schedule (the “Schedule of Objection”) describing the Sellers’
objections to Acquirer within ten (10) Business Days of the Subsequent
Payment Dates or Earn-Out Payment Date, as applicable, or, provided that such
ten (10) Business Day period shall be appropriately extended to the extent
the Sellers reasonably request further information regarding the calculation of
the Uncollected Amount, Inventory Excess or


 


10




















 


Take-Two Product Revenues, as the case may be, and the Acquirer has
failed to provide a reasonably responsive reply by the earlier of: (A) the
date that is two (2) Business Days after the date of any such request or (B) the
Business Day prior to the expiration of such ten (10) Business Day
period.  The Sellers and Acquirer will
use their reasonable best efforts to resolve any such objections.


 


(v)                                 If
a final resolution is not obtained within five (5) Business Days after
Acquirer has received the Schedule of Objection, either party may refer the
dispute to the Accounting Referee for binding resolution.  The Accounting Referee will address only
items disputed by the parties, and may not assign to any such disputed item a
value that is greater than the greatest amount for such item that is claimed by
a party or less than the smallest amount claimed by a party.  Each party will cooperate with the Accounting
Referee and provide the Accounting Referee with any information requested by
it.  The Accounting Referee shall
concurrently deliver to Sellers and Acquirer a written opinion setting forth a
final determination of the First Subsequent Payment, Second Subsequent Payment
or Earn-Out Payment (which, in the case of the Earn-Out Payment, shall be
either zero or $250,000), as the case may be, which determination will be final
and binding on all parties.


 


(vi)                              In
the event the final determination of the First Subsequent Payment or the Second
Subsequent Payment, as the case may be, as determined by the Accounting Referee
is less than the amount paid on the Subsequent Payment Date, the Sellers shall
pay the difference to the Acquirer.  In
the event the First Subsequent Payment or Second Subsequent Payment, as the
case may be, as determined by the Accounting Referee, is greater than the
amount paid on the Subsequent Payment Date, the Acquirer shall pay the
difference to the Sellers; provided, however, that in no event shall (A) the First
Subsequent Payment exceed Three Million Five Hundred Thousand Dollars
($3,500,000) or (B) the Second Subsequent Payment exceed Three Million
Dollars ($3,000,000).  In the event the
final determination of the Earn-Out Payment as determined by the Accounting
Referee is changed from zero to Two Hundred Fifty Thousand Dollars ($250,000),
the Acquirer shall pay the Earn-Out Payment to the Sellers.  All payments under this Section 1.7(b)(vi) shall
be made within five (5) Business Days of determination of the First
Subsequent Payment, Second Subsequent Payment or Earn-Out Payment, as the case
may be, as determined by the Accounting Referee, and shall be paid by wire
transfer of immediately available fund to an account(s) specified by the
Sellers or Acquirer, as applicable.


 


(c)                                  The
“Final Purchase Price” will be the amount equal to the Closing Payment
as adjusted pursuant to Section 1.7(a)(vi), plus the First
Subsequent Payment, as adjusted pursuant to Section 1.7(b), plus
the Second Subsequent Payment, as adjusted pursuant to Section 1.7(b),
plus the Earn-Out Payment, if any.  In no
event shall the Final Purchase Price exceed Forty-Seven Million Two Hundred
Fifty Thousand ($47,250,000).


 


Section 1.8                                      Purchase
Price Allocation.  No later than 15
days after the date hereof, Acquirer shall provide to the Sellers a statement
allocating the Purchase Price among the Purchased Assets of the Canadian
Business and the US Business.  If the
Sellers disagree with Acquirer’s calculation of the Purchase Price allocation,
the Sellers may, within 15 days after 


 


11

















 


delivery of
Acquirer’s calculation of the Purchase Price allocation, deliver a notice to
Acquirer disagreeing with such calculation and setting forth Sellers’ proposed
Purchase Price allocation. Sellers and Acquirer shall, during the 15 day period
following delivery of Sellers’ notice of disagreement, use their reasonable
best efforts to resolve such dispute and reach a mutually agreed Purchase Price
allocation.  The parties shall (i) prepare
and, where applicable, file each report relating to the federal, state, local,
foreign and other Tax consequences of the purchase and sale contemplated hereby
(including the filing of IRS Form 8594 where relevant) in a manner
consistent with their mutually agreed allocation (or, if no such agreement is
reached in accordance with this Section 1.8, in accordance with an
allocation determined in the Acquirer or either Seller’s sole discretion) and (ii) take
no position in any Tax Return or other Tax filing, proceeding, audit or
otherwise which is inconsistent with such allocation, unless otherwise required
pursuant to a “determination” within the meaning of Section 1313(a) of
the Code or pursuant to any analogous foreign legislation.


 


Section 1.9                                      Closing.  Subject to the satisfaction or waiver of all
of the conditions precedent to Closing hereunder, the consummation of the
purchase and sale of the Purchased Assets and the assumption of the Assumed
Liabilities in accordance with this Agreement (the “Closing”) shall take
place at 10:00 a.m., California time, at the offices of Pillsbury Winthrop
Shaw Pittman LLP, 2475 Hanover Street, Palo Alto, CA 94304, on February 26,
2010, or at such other date, time and place as the Sellers and Acquirer shall
mutually agree upon.  The date of the
Closing shall be referred to as the “Closing Date.”  The Sellers and Acquirer hereby agree to
deliver at the Closing such documents, certificates of officers and other
instruments as are set forth in Article VII hereof and as may
reasonably be required to effect the transfer by the Sellers of the Purchased
Assets or the assumption by Acquirer of the Assumed Liabilities pursuant to and
as contemplated by this Agreement and to consummate the Acquisition.  All events which shall occur at the Closing
shall be deemed to occur simultaneously.


 


Section 1.10                                Prorations.  With respect to certain expenses incurred in
the operation of the Business, the following allocations will be made between
Acquirer and the Sellers to ensure that the Sellers will bear such expenses to
the extent they relate to the period prior to the Closing Date, and Acquirer
will bear such expenses to the extent they relate to the period from and after
the Closing Date:


 


(a)                                  utilities,
water and sewer charges will be apportioned based upon the number of operating
days occurring before and after the Closing Date during the billing period for
each such charge; and


 


(b)                                 expenses
incurred pursuant to leases included in the Assumed Liabilities shall be
prorated based on the number of days occurring before and after the Closing
Date during the month in which the Closing Date occurs.


 


Appropriate cash payments shall be made by the Sellers or Acquirer, as
applicable, after the facts giving rise to the obligation for such payments are
known to the Sellers and Acquirer, in the amounts necessary to give effect to
the allocations provided for in this Section 1.10, which amounts
shall be payable on a quarterly basis as a net settlement for such period
beginning on the ninetieth (90th) day after the Closing Date.


 


12

















 


Section 1.11                              Transfer
Taxes.  Acquirer shall be responsible
for the payment of any sales, use, transfer or similar taxes arising out of or
in connection with the Acquisition; provided,
however, the Sellers shall remain
responsible for all other Taxes incurred by them from the conduct of the
Business prior to the Closing Date and the Acquisition (except to the extent
Property Taxes are allocated to Acquirer pursuant to the Sublease).  To the extent applicable, Canadian Seller
will agree to enter into a joint election with the Acquirer pursuant to s. 167
of the Excise Tax Act (Canada).


 


ARTICLE II.



REPRESENTATIONS AND WARRANTIES OF THE SELLERS


 


Subject to the exceptions set forth in the Disclosure Schedule
delivered herewith and dated as of the date hereof, each Seller hereby, jointly
and severally, represents and warrants to Acquirer as follows:


 


Section 2.1                                    Organization
and Qualification.


 


(a)                                  Each
Seller is a corporation duly incorporated, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation, and each has
full corporate power and authority to (i) conduct the Business as now
conducted, (ii) own, use, license and lease the Purchased Assets, and (iii) perform
its obligations under all Contracts to which it is a party.  Each Seller is duly qualified, licensed or
admitted to do business and is in good standing as a foreign corporation in
each jurisdiction in which the ownership, use, licensing or leasing of the
Purchased Assets, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for such failures to be
so duly qualified, licensed or admitted and in good standing that would not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect.  Section 2.1 of the
Disclosure Schedule sets forth each jurisdiction where each Seller is so
qualified, licensed or admitted to do business and separately lists each other
jurisdiction in which the Sellers own, use, license or lease the Purchased Assets,
or conduct Business or have employees or engage independent contractors.


 


Section 2.2                                    Authority
Relative to this Agreement.  Each
Seller has full corporate power and authority to execute and deliver this
Agreement and the other agreements which are attached (or forms of which are
attached) as exhibits hereto (the “Ancillary Agreements”) to which each
Seller is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.  This Agreement and the Ancillary Agreements
to which each Seller is a party have been or will be, as applicable, duly and
validly executed and delivered by each Seller and, assuming the due
authorization, execution and delivery hereof (and, in the case of the Ancillary
Agreements to which the Acquirer is a party, thereof) by each other party
thereto, each constitutes or will constitute, as applicable, a legal, valid and
binding obligation of each Seller enforceable against each Seller in accordance
with its respective terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors’ rights generally
and by general principles of equity.


 


13

















 


Section 2.3                                    Equity
Ownership.  Each Seller is a direct
or indirect wholly owned subsidiary of the Guarantor.


 


Section 2.4                                    Seller
Financial Statements.  The pro forma
unaudited income statements of the Sellers for the years ended October 31,
2007, 2008, and 2009 (the “Sellers’ Financial Statements”), which
statements are attached hereto as Section 2.4 of the Disclosure Schedule,
have been prepared on a basis consistent with the Sellers’ GAAP-based
accounting policies throughout the periods indicated.  The pro forma unaudited financial statements
do not contain footnotes and are subject to normal and recurring year-end audit
adjustments.  The Sellers’ Financial
Statements have been prepared for purposes of providing financial information
regarding the Business to Acquirer for purposes of the transactions
contemplated hereby and, except as set forth in Section 2.4 of the
Disclosure Schedule, represent the Sellers’ good faith estimates of the
operating results of the Sellers (in each case, to the extent related to the
Business, the Purchased Assets and the Assumed Liabilities) during the periods
indicated therein.  Notwithstanding
anything herein to the contrary, Sellers make no representation with respect to
any financial information for the Business other than that the Sellers’
Financial Statements were prepared in good faith.


 


Section 2.5                                    Books
and Records; Organizational Documents. 
The minute books and stock record books and other similar records of the
Sellers have been provided or made available to Acquirer prior to the execution
of this Agreement, are complete and correct in all material respects and have
been maintained in accordance with sound and prudent business practices.  Such minute books contain a true and complete
record of all actions taken at all meetings and by all written consents in lieu
of meetings of the directors, shareholders and committees of the board of
directors of each Seller from January 1, 2004 through the date
hereof.  The Sellers have, prior to the
execution of this Agreement, made available to Acquirer true and complete
copies of their respective Articles of Incorporation and Bylaws, both as
amended through the date hereof.  Each
Seller is not in violation of any provision of its Articles of Incorporation or
Bylaws.


 


Section 2.6                                    No
Undisclosed Liabilities.  Except (i) as
set forth in Section 2.6 of the Disclosure Schedule or in the Sellers’
Financial Statements, (ii) for Liabilities incurred in the ordinary course
of business consistent with past practice since October 31, 2009, or (iii) for
Excluded Liabilities, there are no Liabilities of the Business required under
GAAP to be reflected in the Sellers’ Financial Statements that are not so
reflected.


 


Section 2.7                                    Absence
of Changes.


 


(a)                                 Except as set forth in
Section 2.7 of the Disclosure Schedule, since October 31, 2009:


 


(i)                                     there
has not been any Material Adverse Effect, and no event has occurred that will,
or would reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect;


 


(ii)                                  there
has not been any material loss, damage or destruction to, or any material
interruption in the use of, any of the Purchased Assets;


 


14

















 


(iii)                             there has been no
amendment to either Sellers’ Articles of Incorporation or Bylaws, and the
Sellers have not effected or been a party to any Business Combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;


 


(iv)                              the
Sellers have not formed any Subsidiary or acquired any equity interest or other
interest in any other entity;


 


(v)                                 the
Sellers have not made any capital expenditure which, when added to all other
capital expenditures made on behalf of the Sellers since October 31, 2008,
exceeds $100,000 in the aggregate;


 


(vi)                              neither
Seller has (i) entered into or permitted any of their respective Purchased
Assets to become bound by any Material Contract or (ii) amended or
prematurely terminated, or waived any material right or remedy under, any
Material Contract;


 


(vii)                           except
for actions taken in the ordinary course of business consistent with past
practice, neither Seller has (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) leased or licensed, any right or
other asset to any other Person, or (iii) waived or relinquished any
right, except for an immaterial right or other immaterial asset, that is a
Purchased Asset;


 


(viii)                       the Sellers have not changed any
of their methods of accounting or accounting practices in any material respect;


 


(ix)                               neither Seller has made
any material Tax election;


 


(x)                                  neither Seller has
commenced or settled any Legal Proceeding, or received any written notice that
any Person was commencing or threatening to commence a Legal Proceeding
involving the Sellers;


 


(xi)                               except for actions taken
in connection with the negotiation, execution or delivery of this Agreement and
the Ancillary Agreements, neither Seller has entered into any material
transaction or taken any other material action outside the ordinary course of
business or inconsistent with past practices; and


 


(xii)                           neither Seller has agreed or
committed to take any of the actions referred to in clauses “(iii)” through “(xi)”
above.


 


(b)                                 As
of the date hereof, neither Seller is in default under, or in breach of, any of
the material terms of any loan capital, borrowing, debenture or financial
facility of the Sellers.


 


(c)                                  As
of the date hereof, neither Seller is, nor have the Sellers agreed to become,
bound by any guarantee, surety or similar commitment which has not been
reflected in the Sellers’ Financial Statements.


 


15

















 


(d)                                 Neither
Seller has received any grants, allowances, loans or financial aid of any kind
from any government departmental or other board, body, agency or authority
which may become liable to be refunded or repaid in whole or in part.


 


Section 2.8                                    Real
Property.


 


(a)                                  Neither
Seller owns any real property.


 


(b)                                 Section 2.8(b) of
the Disclosure Schedule sets forth a list of all real property currently
leased, licensed or subleased by the Sellers or otherwise used or occupied by
the Sellers (the “Leased Real Property”).  All documents related to such lease, license,
sublease, use or occupation (the “Lease Documents”) are in full force
and effect, are valid and effective in accordance with their respective terms
in all material respects, and there is not, under any of the Lease Documents,
any material existing breach, default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) by the Sellers
or, to the Sellers’ Knowledge, any third party under any of the Lease
Documents, in each case subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights
and remedies of creditors generally and to general principles of equity.  Except as set forth on Section 2.8(b) of
the Disclosure Schedule, (i) no parties other than the Sellers have a
right to occupy any material Leased Real Property, (ii) the Leased Real
Property is used only for the operation of the Business of the Sellers, (iii) the
Leased Real Property and the physical assets of the Sellers are, in all
material respects, in good condition and repair and regularly maintained in
accordance with standard industry practice, (iv) the Leased Real Property
is in compliance, in all material respects, with all applicable Laws and (v) neither
Seller will be required to incur any material cost or expense for any restoration
or surrender obligations, or any other material costs otherwise qualifying as
asset retirement obligations under Financial Accounting Standards Board
Statement of Financial Accounting Standard No. 143 “Accounting for
Asset Retirement Obligations,” upon the expiration or earlier termination
of any leases or other occupancy agreements for the Leased Real Property.


 


(c)                                  The
Sellers have made available to Acquirer true, correct and complete copies of
all Lease Documents.


 


Section 2.9                                    Valid
Title/Sufficiency of Assets.


 


(a)                                  Except
as set forth on Section 2.9(a) of the Disclosure Schedule, the
Sellers have good, marketable and valid title to, or, in the case of leased
Purchased Assets, valid leasehold interest in, the Purchased Assets free and
clear of any Liens except Permitted Liens.


 


(b)                                 Except
as set forth on Section 2.9(b) of the Disclosure Schedule, the
Purchased Assets constitute all of the rights, contracts, property and assets,
tangible and intangible, necessary to operate the Business in all materials
respects in the manner presently operated by the Sellers.


 


Section 2.10                              Intellectual
Property.  Section 2.10 of the
Disclosure Schedule lists (i) all registered Intellectual Property owned
by Sellers (“Sellers Registered Intellectual Property”) (including all
trademarks and service marks that the Sellers have used with the intent of
creating or benefiting from any common law rights relating to such marks), (ii) the
jurisdiction in which 


 


16

















 


such item of
Sellers Registered Intellectual Property has been registered or filed and the
applicable registration or serial number, (iii) any other Person that, to
the Sellers’ Knowledge, has an ownership interest in such item of Sellers
Registered Intellectual Property and the nature of such ownership interest, and
(iv)  any proceedings or actions pending as of the date hereof before any
court or tribunal (including the United States Patent and Trademark Office or
equivalent authority anywhere in the world) related to any of the Sellers
Registered Intellectual Property.


 


(a)                                  Except
as set forth in Section 2.10(a) of the Disclosure Schedule, each item
of Seller Intellectual Property, including all Sellers Registered Intellectual
Property listed in Section 2.10(a) of the Disclosure Schedule, is
owned exclusively by the Sellers and is free and clear of any Liens.


 


(b)                                 Without
limiting the generality of the foregoing, the Sellers own exclusively, and have
good title to, each copyrighted work that is a Seller product and each other
work of authorship that the Sellers otherwise purport to own.


 


(c)                                  To
the extent that any Seller Intellectual Property has been developed or created
by any Person other than the Sellers, the Sellers have a written agreement with
such Person with respect thereto and the Sellers have either (i) obtained
ownership of, and is the exclusive owner of, all such Intellectual Property by
operation of law or by valid assignment of any such rights or (ii) has
obtained a License under or to such Intellectual Property as disclosed under Section 2.10(c) of
the Disclosure Schedule.


 


(d)                                 Section 2.10(d) of
the Disclosure Schedule lists all Contracts (including all inbound Licenses) to
which either Seller is a party that grant licenses to Intellectual Property,
other than standard Licenses for off-the-shelf, shrink-wrap software or “open
source” code that is commercially available on reasonable terms to any
Person.  Except as set forth in Section 2.10(d) of
the Disclosure Schedule, neither Seller is in breach of, nor has it failed to
perform under any of the foregoing Contracts and Licenses in any material
respect.


 


(e)                                  Except
as set forth in Section 2.10(e) of the Disclosure Schedule, the
operation of the Business as currently conducted does not (i) to the
Sellers’ Knowledge, infringe or misappropriate the Intellectual Property of any
Person, (ii) materially violate any term or provision of any License or
Contract concerning such Intellectual Property, or (iii) constitute unfair
competition or an unfair trade practice under any U.S. Law, and the Sellers
have not received written notice from any Person claiming that such operation
or any act, product, technology or service (including products, technology or
services currently under development) of the Sellers infringes or misappropriates
the Intellectual Property of any Person or constitutes unfair competition or
trade practices under any Law.


 


(f)                                    To
the Sellers’ Knowledge, no Person is infringing or misappropriating any Seller
Intellectual Property and the Sellers (i) have not asserted or threatened
in writing or orally any claim against any Person alleging any infringement,
misappropriation or violation of any Seller Intellectual Property and (ii) are
not aware of any facts or circumstances which could give rise to a such claim.


 


17

















 


(g)                                 The
Sellers presently take commercially reasonable steps to protect the Sellers’
rights in confidential information and trade secrets of the Sellers or provided
by any other Person to the Sellers subject to a duty of confidentiality.  Without limiting the generality of the
foregoing, the Sellers have, and enforce, a policy requiring each employee,
consultant and independent contractor to execute proprietary information,
confidentiality and invention and copyright assignment agreements substantially
in the form set forth as Attachment 2.10(g) to the Disclosure Schedule,
and all current employees, consultants and independent contractors of the
Sellers, except as set forth in Section 2.10(g) of the Disclosure
Schedule, have executed such an agreement and copies of all such agreements
have been provided to Acquirer or made available to Acquirer for review.


 


(h)                                 Neither
this Agreement nor any transactions contemplated by this Agreement will result
in Acquirer or the Sellers after the Closing Date granting any rights or
licenses with respect to the Intellectual Property of Acquirer or the Sellers
after the Closing Date, to any Person pursuant to any Contract to which either
Seller is a party or by which any of their Purchased Assets are bound. Neither
this Agreement nor any transaction contemplated by this Agreement will result
in the loss of any ownership or License rights of the Sellers or the Acquirer
from and after the Closing Date in any of the Sellers Intellectual Property or
require or obligate Acquirer or the Sellers after the Closing Date (i) to
grant to any third party any rights or licenses with respect to any Seller
Intellectual Property; or (ii) to pay any royalties or other amounts.  Neither this Agreement nor any transaction
contemplated by this Agreement will give to any third party the right to
terminate, in whole or in part, any Contracts or Licenses to which either
Seller is a party with respect to any Intellectual Property, except for the
Contracts or Licenses set forth in Section 2.10(i) of the Disclosure
Schedule.


 


(i)                                     Neither
Seller has deposited with an escrow agent or any other Person, any of its
computer software and code, in a form other than object code form, including
related programmer comments and annotations, which may be printed out or
displayed in readily human readable form.


 


Section 2.11                              Contracts.


 


(a)                                  Section 2.11(a) of
the Disclosure Schedule (with paragraph references corresponding to those set
forth below) contains a true and complete list of each of the following
Contracts or other arrangements (true and complete copies of which or, if none,
reasonably complete and accurate written descriptions thereof, together with
all amendments and supplements thereto and all waivers of any terms thereof,
have been made available to Acquirer prior to the execution of this Agreement)
other than Excluded Contracts, to which either Seller is a party or by which
any of the Purchased Assets is bound (collectively, the “Material Contracts”):


 


(i)                                     (A) 
all Contracts providing for consulting or other services for a specified or
unspecified term, the name, position and rate of compensation of each Person
party to such a Contract and the expiration date of each such Contract, but
only to the extent such Contracts provide for an annual base compensation to
each Person party to such a Contract in excess of $50,000 per annum and (B) any
written or unwritten representations, commitments, promises, communications or
courses of conduct 


 


18

















 


involving an obligation of the Sellers to make payments (with or
without notice, passage of time or both) to any Person in connection with, or
as a consequence of, the transactions contemplated hereby or to any employee
who is disclosed in Section 2.11(a)(i) of the Disclosure Schedule,
other than with respect to salary or incentive compensation payments in the
ordinary course of business consistent with past practice;


 


(ii)                                  all
Contracts with any Person containing any provision or covenant prohibiting or
limiting the ability of the Sellers to engage in any business activity or
compete with any Person or prohibiting or limiting the ability of any Person to
compete with the Sellers;


 


(iii)                               all
partnership, joint venture, shareholders’ or other similar Contracts;


 


(iv)                              all
Contracts relating to Indebtedness in an amount of $50,000 or more;


 


(v)                                 any
trust indenture, mortgage, promissory note, loan agreement or other Contract
for the borrowing of money, any currency exchange, commodities or other hedging
arrangement or any leasing transaction of the type required to be capitalized
in accordance with GAAP;


 


(vi)                              all
Contracts in excess of $50,000 per annum entered into outside the ordinary
course of business (A) with independent contractors, distributors,
dealers, manufacturers’ representatives, sales agencies or franchisees, (B) with
aggregators, manufacturers and equipment vendors, and (C) with respect to
the sale of services, products or both, to customers;


 


(vii)                           all
guarantees of any Indebtedness or other obligations to any Person, including,
but not limited to, any agreement of guarantee, support, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
Liabilities or Indebtedness of any other Person;


 


(viii)                        all
Contracts (other than employment-related agreements) between or among either
Seller, on the one hand, and any current or former officer, director,
shareholder, or Affiliate of the Sellers, on the other hand;


 


(ix)                                all
Contracts that (A) limit or contain restrictions on the ability of the
Sellers to declare or pay dividends on, to make any other distribution in
respect of or to issue or purchase, redeem or otherwise acquire the capital
stock of either Seller, to incur Indebtedness, to incur or suffer to exist any
Lien, to purchase or sell any Purchased Assets, to change the lines of business
in which Sellers participate or engage, (B) require the Sellers to
maintain specified financial ratios or levels of net worth or other indicia of
financial condition or (C) require either Seller to maintain insurance in
certain amounts or with certain coverage;


 


(x)                                   any
Contract that expires or may be renewed at the option of any Person other than
the Sellers, so as to expire more than one (1) year after the date of this



 


19

















 


Agreement and which (A) requires payments by the Sellers in excess
of $100,000 per annum (either alone or pursuant to a series of related
contracts) or (B) requires the provision of services to any Person after
the Closing;


 


(xi)                                any
Contract that is not terminable by the Sellers upon thirty (30) days (or less)
notice by the Sellers without penalty or obligation to make payments based on
such termination and which (A) requires payments by the Sellers in excess
of $100,000 per annum (either alone or pursuant to a series of related
contracts) or (B) requires the provision of services to any Person after
the Closing;


 


(xii)                             any
Contract containing any covenant (A) limiting in any material respect the
right of either Seller to engage or compete in any line of business, which
covenant would apply to Acquirer after the Closing, (B) granting any
exclusive distribution rights, or (C) providing “most favored nations”
terms for Sellers’ products or services;


 


(xiii)                          all
powers of attorney and comparable delegations of authority other than powers of
attorney executed in favor of employees or agents of Guarantor or its
subsidiaries in connection with federal, state or local tax returns; and


 


(xiv)                         all
other Contracts not otherwise required to be disclosed above in Section 2.11(a) of
the Disclosure Schedule which were not entered into in the ordinary course of
business and which are material to the Business.


 


(b)                                 Except
as set forth in Section 2.11(a) of the Disclosure Schedule, each
Material Contract required to be disclosed in Section 2.11(a) of the
Disclosure Schedule is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, and to the
Knowledge of the Sellers, each other party thereto.


 


(c)                                  Except
as set forth in Section 2.11(c) of the Disclosure Schedule:


 


(i)                                     neither
Seller has violated or breached, or committed any default under, any Material
Contract in any material respect to which it is a party, and, to Sellers’
Knowledge, no other Person has violated, breached, or committed any default
under any such Material Contract in any material respect;


 


(ii)                                  to
the Sellers’ Knowledge, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to, (A) result in a violation or breach of any of
the provisions of any Material Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Material Contract, (C) give
any Person the right to accelerate the maturity or performance of any Material
Contract, or (D) give any Person the right to cancel, terminate or modify
any Material Contract;


 


(iii)                               since
July 31, 2009, to the Sellers’ Knowledge, neither Seller has received any
notice or other communication regarding any actual or possible violation,
breach of, or default under, any Material Contract; and


 


20
















 


(iv)                              neither Seller
has waived any of its material rights under any Material Contract.


 


(d)                                 Except as set forth in Section 2.11(d) of
the Disclosure Schedule, neither Seller has guaranteed or otherwise agreed to
cause, insure or become liable for, nor pledged any of the Purchased Assets to
secure, the performance or payment of any obligation or other Liability of, any
other Person.


 


(e)                                  Section 2.11(e) of
the Disclosure Schedule identifies and provides an accurate and complete
description of each proposed Material Contract as to which any written bid,
offer, proposal, term sheet or similar document has been submitted or received
by the Sellers since April 1, 2009.


 


Section 2.12                              Employees.


 


(a)                                  A complete and accurate list
of all current employees, officers, directors, contractors and consultants of
the Sellers as of the date hereof, together with their titles or positions,
dates of hire, regular work location and current compensation (salary and
benefits) is included in Section 2.12(a)(i) of the Disclosure Schedule.  Except as set forth in Section 2.12(a)(ii) of
the Disclosure Schedule, the completion of the transactions contemplated by
this Agreement will not result in any payment or increased payment becoming due
to any current or former officer, director, or employee of, or consultant
pursuant to an agreement assumed by the Acquirer or pursuant to which the
Acquirer would have any liability.


 


(b)                                 Except as described in Section 2.12(b) of
the Disclosure Schedule, as of the date hereof, there are no outstanding offers
of employment or engagement made to any person by Seller and there is no one
who has accepted an offer of employment or engagement made by Seller who has
not yet taken up that employment or engagement.


 


(c)                                  No grievance or complaint of
sex, race or disability discrimination is pending in an administrative or
litigation proceeding.


 


(d)                                 Section 2.12(d) of
the Disclosure Schedule sets forth a list of all Plans.  The Sellers have made available to the
Acquirer a true and complete copy of each Plan and, to the extent applicable,
all current summary plan descriptions and all determination letters from the
IRS with respect to any Plan. In addition, (i) each Plan has been
maintained in all material respects in accordance with its terms and the
requirements of ERISA and the Code and other applicable Laws, (ii) each
Seller has performed all material obligations required to be performed by it
under any Plan and is not in any material respect in default under or in
violation of any Plan, and (iii) no material legal action (other than
claims for benefits in the ordinary course) is pending or, to the Sellers’
Knowledge, threatened in writing with respect to any Plan by any current or
former employee, officer or director of the Sellers.


 


(e)                                  Each Plan that is intended
to be qualified under Section 401(a) of the Code or Section 401(k) of
the Code has received a favorable determination letter or can rely on an
opinion letter from the IRS that it is so qualified and each related trust that
is intended to be exempt from federal income taxation under Section 501(a) of
the Code has received a determination letter or can rely on an opinion letter
from the IRS that it is so exempt and, to the 


 


21

















 


Knowledge of the Sellers, no fact or event has occurred since the date
of such determination letter or letters from the IRS that could reasonably be
expected to adversely affect the qualified status of any such Plan or the
exempt status of any such trust.


 


(f)                                    No Plan is subject to Title
IV of ERISA, no Plan is a “multiemployer plan” as defined in Sections 3(37) of
ERISA and 414(f) of the Code, nor a “multiple employer plan” as described
in Sections 4063(a) of ERISA and 413 of the Code, and neither any Seller
nor any Person which, together with such Seller, would be treated as a single
employer under Sections 4001 of ERISA or 414 of the Code has ever contributed
or had an obligation to contribute to any such plans.


 


(g)                                 Except as described on Section 2.12(g) of
the Disclosure Schedule, (i) the Sellers are in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, (ii) there
is no unfair labor practice complaint against the Sellers pending before the
National Labor Relations Board or similar Governmental or Regulatory Authority,
(iii) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the Sellers’ Knowledge, threatened against or affecting the
Sellers, (iv) within the past three (3) years, neither Seller has
experienced any strike, work stoppage or other labor difficulty, and (v) neither
Seller is a party to, or subject to, a collective bargaining agreement, no
collective bargaining agreement relating to employees of the Sellers is
currently being negotiated and no union organization activities are, to the
Sellers’ Knowledge, pending or threatened.


 


(h)                                 Each current employee and
officer of the Seller has executed an agreement which contains a clause assigning
the inventions created by the employee within the scope and term of employment,
during work time or with a Seller’s facilities or materials, to the
Sellers.  No current or former employee
or officer of any Seller has excluded works or inventions from his or her
assigned inventions pursuant to such proprietary information and inventions
agreement or similar agreement which contains a clause in this respect.


 


Section 2.13                              Compliance and
Licenses.


 


(a)                                  The Sellers have maintained
and are in compliance in all material respects with the terms of all Permits
required to be obtained by them in connection with the conduct of the Business.


 


(b)                                 To the Sellers’ Knowledge,
no Permit currently held by the Sellers and necessary for the carrying on of
the Business as carried on as of the Closing will not be renewed in whole or in
part nor have the Sellers received any notice that any material Permit is
likely to be revoked, suspended or cancelled.


 


(c)                                  The Sellers are in
compliance in all material respect with all applicable Laws.  Neither Seller has committed nor is it liable
for, and no claim has been made that it has committed or is liable for, any
criminal or illegal act.


 


(d)                                 Neither of the Sellers is
the subject of any public prohibition or injunction, and, to the Knowledge of
the Sellers, no such prohibition or injunction is imminent and no proceedings
in respect thereof have been commenced. 
Neither of the Sellers has received 


 


22

















 


notification that any investigation or inquiry is being, or has been,
conducted by, or received any request for information from any governmental,
regulatory or other authority, department, board, body or agency in respect of
its affairs.


 


Section 2.14                              Substantial
Customers and Suppliers.  Section 2.14
of the Disclosure Schedule lists the customers of the Sellers that in the
aggregate account for not less than seventy-five percent (75%) of the revenues
collected or accrued for the most recent complete fiscal year and for the nine
months ended September 30, 2009, and lists such revenues.  Section 2.14 of the Disclosure Schedule
lists the suppliers of the Sellers that in the aggregate account for not less
than seventy-five percent (75%) of cost of goods or services purchased for the
most recent fiscal year and for the nine months ended September 30, 2009
and lists such cost of goods or services purchased.  To the Sellers’ Knowledge, except as set
forth on the lists for the nine months ended September 30, 2009 contained
in Section 2.14 of the Disclosure Schedule, no such customer or supplier
has notified Sellers in writing that it has or plans to cease or materially
reduce its purchases from or sales or provision of services to the Sellers due
to the pendency of the Acquisition or otherwise during the 12 month period
following the date hereof.  The Sellers
currently enjoys a good working relationships with each of their material
customers and suppliers.


 


Section 2.15                              Accounts
Receivable.


 


(a)                                  Section 2.15(a) of
the Disclosure Schedule lists all accounts receivables, notes receivables and
other receivables of the Sellers as of October 31, 2009, which (a) arose
from bona fide sales transactions in the ordinary course of business,
consistent with past practice, and are payable on ordinary trade terms, (b) have
been properly accrued in accordance with GAAP, (c) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their respective terms in all material respects, (d) except in the
ordinary course of business, are not subject to any valid set-off, counterclaim
or rebate and (e) except in the ordinary course of business, do not
represent obligations for goods sold on consignment, on approval or on a
sale-or-return basis or subject to any other repurchase or return
arrangement.  Section 2.15(a) of
the Disclosure Schedule shall be updated five (5) Business Days prior to
the Closing to reflect changes in the accounts receivable since October 31,
2009.


 


(b)                                 Except as set forth in Section 2.15
of the Disclosure Schedule, the accounts and notes receivable of the Sellers
reflected on the Sellers’ Financial Statements, and all accounts and notes
receivable arising subsequent to October 31, 2009, (a) arose from
bona fide sales transactions in the ordinary course of business, consistent
with past practice, and are payable on ordinary trade terms, (b) are
legal, valid and binding obligations of the respective debtors enforceable in
accordance with their respective terms in all material respects, (c) except
in the ordinary course of business, are not subject to any valid set-off,
counterclaim or rebate and (d) except in the ordinary course of business,
do not represent obligations for goods sold on consignment, on approval or on a
sale-or-return basis or subject to any other repurchase or return arrangement.


 


23

















 


Section 2.16                              Inventory.


 


(a)                                  Section 2.16(a) of
the Disclosure Schedule lists all inventories and work-in-progress as of October 31,
2009, which shall be updated five (5) Business Days prior to the Closing
to reflect any changes in inventory since October 31, 2009.


 


(b)                                 Except as disclosed on Section 2.16(a) of
the Disclosure Schedule, all inventory included in the Purchased Assets
consists of a quality and quantity usable and salable in the ordinary course of
business as currently conducted or as reasonably contemplated to be
conducted.  Except as disclosed in the
notes to the Sellers’ Financial Statements or on Section 2.16(a) of
the Disclosure Schedule, all items included in the inventory of the Sellers
included in the Purchased Assets are the property of the Sellers free and clear
of any Lien (other than Permitted Liens), have not been pledged as collateral,
are not held by the Sellers on consignment from others and conform in all
material respects to all standards applicable to such inventory or its use or
sale imposed by Governmental or Regulatory Authorities.


 


Section 2.17                              Approvals.  Section 2.17 of the Disclosure Schedule
contains a list of all material Approvals which are required to be given to or
obtained by the Sellers from any and all third parties, including any
Governmental or Regulatory Authorities in connection with the consummation of
the transactions contemplated by this Agreement and the Ancillary Agreements.


 


Section 2.18                              Tax.


 


(a)                                  All Tax Returns required to
be filed by or on behalf of the Sellers have been duly filed on a timely basis
and such Tax Returns were, when filed, true, complete and correct in all
material respects.  All Taxes shown to be
payable on such Tax Returns or on subsequent assessments with respect thereto
have been paid in full on a timely basis, and no other Taxes are due and
payable by the Sellers with respect to items or periods covered by such Tax
Returns (whether or not shown on such Tax Returns).  The Sellers have withheld and paid over all
Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other third
party.  There are no Liens on any of the
Purchased Assets with respect to Taxes, other than Permitted Liens.  Neither the Sellers nor the Guarantor have
been at any time a member of an affiliated group of corporations filing
consolidated, combined or unitary income or franchise tax returns other than as
a member of a group of which either Seller or the Guarantor is the ultimate
parent for a period for which the statute of limitations for any Tax
potentially applicable as a result of such membership has not expired.


 


(b)                                 The amount of the Sellers’
liabilities for unpaid Taxes for all periods through October 31, 2009 does
not, in the aggregate, exceed the amount of the liability accruals for Taxes
reflected on the Sellers’ Financial Statements, and the Sellers’ Financial
Statements properly accrue in accordance with GAAP all liabilities for Taxes of
the Sellers payable after October 31, 2009 attributable to transactions
and events occurring prior to such date. 
No liability for Taxes of the Sellers has been incurred or material
amount of taxable income has been realized (or prior to and including the
Closing Date will be incurred or realized) after October 31, 2009 other
than in the ordinary course of business.


 


24

















 


(c)                                  No audit of the Tax Returns
of or including the Sellers by a government or taxing authority is in process,
threatened or, to the Sellers’ Knowledge, pending.  No deficiencies exist or have been asserted
in writing with respect to Taxes of the Sellers, and the Sellers have not
received written notice that either Seller has not filed a Tax Return or paid
Taxes required to be filed or paid.  The
Sellers are not a party to any action or proceeding for assessment or collection
of Taxes, nor has such event been asserted or threatened in writing against the
Sellers or any of their assets.  No
waiver or extension of any statute of limitations is in effect with respect to
Tax Returns or material Taxes of the Sellers.


 


(d)                                 The Sellers are not (nor has
it ever been) a party to any tax sharing agreement.  Since inception, the Sellers have not been a
distributing corporation or a controlled corporation in a transaction described
in Section 355(a) of the Code.


 


(e)                                  No Purchased Asset being
sold by the Canadian Seller is a “United States real property interest” within
the meaning of Section 897(c) of the Code.


 


Section 2.19                              Environmental
Matters.  Except as set forth in Section 2.19
of the Disclosure Schedule:


 


(a)                                  The Sellers possess any and
all material Environmental Permits necessary to or required for their operation
of the Business as currently conducted.


 


(b)                                 The Sellers are in material
compliance with (i) all terms, conditions and provisions of their
Environmental Permits; and (ii) all applicable Environmental Laws.


 


(c)                                  To the Sellers’ Knowledge,
neither Seller nor any predecessor thereof nor any entity previously owned
thereby has received any written notice of or inquiry regarding alleged, actual
or potential responsibility for (i) any Release or threatened or suspected
Release of any Hazardous Material, or (ii) any violation of any applicable
Environmental Law, and there is no outstanding civil, criminal or
administrative investigation, action, suit hearing or proceeding pending or
threatened against the Sellers pursuant to any applicable Environmental Law.


 


(d)                                 To the Sellers’ Knowledge,
neither Seller nor any predecessor thereof nor any entity previously owned
thereby has any obligation or liability with respect to any Hazardous Material
under any applicable Environmental Law, including any Release or threatened or
suspected Release of any Hazardous Material and any violation of any applicable
Environmental Law, and there have been no events, facts or circumstances which
could reasonably be expected to form the basis of any such obligation or
liability.


 


(e)                                  The representations and
warranties contained in this Section 2.19 shall serve as the sole
and exclusive representations and warranties of the Sellers relating to
Environmental Laws and/or Hazardous Materials.


 


Section 2.20                              Absence of
Litigation.


 


(a)                                  No material Legal
Proceedings by or against either Seller are pending or, to the Sellers’
Knowledge, threatened against either Seller.


 


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(b)                                 To the Sellers’ Knowledge,
neither Seller is subject to any judgment, injunction or other judicial or
arbitral decision or award which restricts the Sellers’ present or future
business.


 


Section 2.21                              Export Control
Laws.  Each Seller has at all times
conducted its export transactions materially in accordance with (i) all
applicable U.S. export and re-export controls, including the United States
Export Administration Act and Regulations and Foreign Assets Control
Regulations and (ii) all other applicable import/export controls in other
countries in which the Sellers conduct business.  Without limiting the foregoing:


 


(a)                                  Each Seller has obtained,
and is in material compliance with, all export licenses, license exceptions and
other consents, notices, waivers, approvals, orders, authorizations,
registrations, declarations, classifications and filings with any Governmental
or Regulatory Authority required for (i) the export and re-export of
products, services, software and technologies and (ii) releases of
technologies and software to foreign nationals located in the United States and
abroad (“Export Approvals”);


 


(b)                                 There are no pending or, to
the Sellers’ Knowledge, threatened claims against the Sellers with respect to
such Export Approvals; and


 


(c)                                  To the Sellers’ Knowledge,
as of the date hereof, there are no actions, conditions or circumstances
pertaining to the Sellers’ export transactions that have given rise to any
claims.


 


Section 2.22                              Foreign Corrupt
Practices Act.  To the
Sellers’ Knowledge, neither Seller (including any of their officers, directors,
agents, distributors, employees or other Person acting on behalf of the
Sellers) have, directly or indirectly, taken any action which would cause them
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any rules or regulations thereunder or any similar anti-corruption or
anti-bribery legal requirements applicable to the Sellers in any jurisdiction
other than the United States (collectively, the “FCPA”), or, to the Sellers’
Knowledge, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, made,
offered or authorized any unlawful payment to foreign or domestic government
officials or employees, whether directly or indirectly, or made, offered or
authorized any unlawful bribe, rebate, payoff, influence payment, kickback or
other similar unlawful payment, whether directly or indirectly.  The Sellers have established reasonable
internal controls and procedures intended to ensure compliance with the FCPA.


 


Section 2.23                              Insurance
Coverage.  As of the
date hereof, all Insurance Policies of the Sellers are outstanding and duly in
force.


 


Section 2.24                              Brokers or
Finders.  No person is entitled to receive
from the Sellers any finder’s fee, brokerage or other commission in connection
with this Agreement or the sale and purchase of all or part of the Purchased
Assets.


 


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Section 2.25                              Bankruptcy
Matters.


 


(a)                                  Since January 1, 2003,
the Sellers have not (i) made a general assignment for the benefit of
creditors, (ii) filed, or had filed against it, any bankruptcy petition or
similar filing, (iii) suffered the attachment or other judicial seizure of
all or a substantial portion of its assets or (iv) admitted in writing its
inability to pay its debts as they become due.


 


(b)                                 Neither Seller is insolvent
and, immediately after giving effect to the consummation of the Acquisition,
each Seller will be able to pay its Liabilities as they become due in the usual
course of its business and will have assets (calculated at fair market value)
that exceed their Liabilities.


 


Section 2.26                              No Conflict
with Other Instruments. 
Except as set forth in Section 2.26 of the Disclosure Schedule, the
execution, delivery and performance of this Agreement, the Ancillary Agreements
and the transactions contemplated hereby (a) will not result in any
violation of, conflict with, constitute a breach, violation or default (with or
without notice or lapse of time, or both) under, give rise to a right of
termination, cancellation, forfeiture or acceleration of any obligation or loss
of any benefit under, or result in the creation or encumbrance on any of the
Purchased Assets pursuant to (i) any provision of either Seller’s Articles
of Incorporation, as amended, or Bylaws, or (ii) any agreement, contract,
understanding, note, mortgage, indenture, lease, franchise, license, permit or
other instrument to which either Seller is a party or by which the Purchased
Assets are bound, or (b) conflict with or result in any breach or
violation of or require any consent, approval or action of, or require the
Sellers or any shareholder to make any filing with any Governmental or
Regulatory Authority or under any statute, judgment, decree, order, rule or
governmental regulation applicable to the Sellers or the Purchased Assets,
except, in the case of clauses (a)(ii) for any of the foregoing that would
reasonably be expected not to, individually or in the aggregate, have a
Material Adverse Effect or that would reasonably be expected not to result in
the creation of any material Lien, charge or encumbrance upon any assets of the
Sellers or that would not prevent, materially delay or materially burden the
transactions contemplated by this Agreement.


 


Section 2.27                              Schedules.  Notwithstanding anything to the contrary
contained in this Agreement, no matter relating exclusively to any of the
Excluded Assets or Excluded Liabilities is required to be disclosed on any Section of
the Disclosure Schedule (other than Section 1.3 of the Disclosure
Schedule).


 


ARTICLE III.


 


REPRESENTATIONS AND WARRANTIES OF ACQUIRER


 


The Acquirer hereby represents and warrants to
Sellers as follows:


 


Section 3.1                                    Organization.  The Acquirer is a corporation duly
incorporated, validly existing and in good standing under the Laws of the state
of Delaware and has full corporate power and authority to own, lease, license
and operate its properties, to perform its obligations under all Contracts, and
to carry on its business as now being conducted.  The Acquirer is duly qualified, licensed or
admitted to do business and is in good standing as a foreign corporation in
each jurisdiction in which its conduct or nature of its business makes such
qualification, licensing or admission necessary, except for such failures to be
so duly qualified, licensed or 


 


27

















 


admitted and in good standing that would not reasonably be expected to,
individually or in the aggregate, have a material adverse effect on the
Acquirer.


 


Section 3.2                                    Authority.  The Acquirer has full corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party and to perform its obligations hereunder and thereunder and
consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement
and all Ancillary Agreements to which is a party, the performance by the
Acquirer of its obligations hereunder and thereunder and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Acquirer.  This Agreement and all Ancillary Agreements
to which it is a party is a valid and binding obligation of the Acquirer.


 


Section 3.3                                    No Conflict
with Other Instruments.  The
execution, delivery and performance of this Agreement, the Ancillary Agreements
and the transactions contemplated hereby (a) will not result in any
violation of, conflict with, constitute a breach, violation or default (with or
without notice or lapse of time, or both) under, give rise to a right of
termination, cancellation, forfeiture or acceleration of any obligation or loss
of any benefit under, or result in the creation or encumbrance on any of the
properties or assets of the Acquirer or any of its subsidiaries, pursuant to (i) any
provision of the Acquirer’s Certificate of Incorporation or Bylaws or similar
organizational documents, or (ii) any agreement, contract, understanding,
note, mortgage, indenture, lease, franchise, license, permit or other
instrument to which the Acquirer or any of its subsidiaries is a party or by
which the properties or assets of the Acquirer or any of its subsidiaries is
bound, or (b) conflict with or result in any breach or violation of or
require any consent, approval or action of, or require the Acquirer or any
shareholder to make any filing with any Governmental or Regulatory Authority or
under any statute, judgment, decree, order, rule or governmental
regulation applicable to the Acquirer or any of its subsidiaries or their
respective properties or assets, except, in the case of clauses (a)(ii) and
(b) for any of the foregoing that would reasonably be expected not to,
individually or in the aggregate, have a material adverse effect on the
Acquirer and its subsidiaries, taken as a whole, or that would not result in
the creation of any material Lien, charge or encumbrance upon any assets of the
Acquirer or any of its subsidiaries or that would not prevent, materially delay
or materially burden the transactions contemplated by this Agreement.


 


Section 3.4                                    Governmental
Consents.  No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental or Regulatory Authority is required by or with respect
to the Acquirer in connection with the execution and delivery of this Agreement
and all Ancillary Agreements to which it is a party by the Acquirer or the
consummation by the Acquirer of the transactions contemplated hereby, except
for such consents, approvals, orders, authorizations, registrations,
declarations, qualifications or filings as may be required under federal or
state securities laws in connection with the transactions set forth herein or which
the failure to obtain would not prevent, materially delay or materially burden
the transactions contemplated by this Agreement.


 


Section 3.5                                    Software.  The Acquirer possesses valid licenses from
Microsoft Corporation and/or its affiliates that will enable the Acquirer, upon
the Closing, to accept the assignment of the Microsoft software that is
included in the Purchased Assets.


 


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Section 3.6                                    Brokers or
Finders.  No person is entitled to
receive from the Acquirer any finder’s fee, brokerage or other commission in
connection with this Agreement or the Acquisition.


 


Section 3.7                                    Purchase Price.  The Acquirer has and will have sufficient
cash available, lines of credit or other sources of immediately available funds
from creditworthy financial institutions to remit the Purchase Price, the
Subsequent Payments, the Earn-Out Payment and any payment with respect to the
Tangible Net Worth, as applicable, and all fees and expenses incurred by the
Acquirer in connection herewith, and together with operating income of the
Business to permit the Acquirer to timely pay or perform, after the Closing
Date, all of its Liabilities.


 


Section 3.8                                    Investigation.  The Acquirer further acknowledge and agree
that (i) the only representations, warranties, covenants and agreements
made by Sellers are the representations, warranties, covenants and agreements
made in this Agreement and the other Ancillary Agreements and the Acquirer has
not relied upon any other representations made or supplied by or on behalf of
Sellers or by any Affiliate or representative of Sellers, and (ii) any
claims the Acquirer may have for breach of representation or warranty shall be
based solely on the representations and warranties of the Sellers set forth in Article II
hereof (as modified by the Disclosure Schedule).


 


ARTICLE IV.


 


CONDUCT PRIOR TO THE CLOSING DATE


 


Section 4.1                                    Conduct of
Business of the Sellers. 
Except as set forth on Section 4.1 of the Disclosure Schedule,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement and the Closing, the Sellers agree
(unless the Sellers are required to take such action pursuant to this Agreement
or the Acquirer shall give its prior consent in writing which consent shall not
be unreasonably withheld, conditioned or delayed) to carry on its business in
the usual, regular and ordinary course consistent with past practice, to pay or
perform its Liabilities, Taxes and obligations consistent with the Sellers’
past practices (other than Liabilities, Taxes and other obligations, if any,
contested in good faith through appropriate proceedings), and, to the extent
consistent with such business, to use all commercially reasonable efforts to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, independent
contractors and other Persons having business dealings with it, all with the
express purpose and intent of preserving its goodwill and ongoing businesses at
the Closing Date.  In addition, the
Sellers shall, prior to the Closing, cooperate in good faith with the Acquirer
to facilitate the transition of the Sellers’ customers and vendors, including,
but not limited to, obtaining assignments, consents, and assurances from such
customers and vendors with respect to the Acquisition; provided, however,
the Sellers shall not be required to make any payments to obtain such
assignments, consents or assurances. 
Without limiting the generality of the foregoing, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Closing, except as set forth in the Disclosure
Schedule or as required or expressly permitted by 


 


29

















 


this Agreement or with the prior written consent of the Acquirer (not
to be unreasonably withheld, conditioned or delayed), the Sellers shall not do,
cause or permit any of the following:


 


(a)                                  Charter Documents:  cause or permit any amendments to its
Articles of Incorporation or Bylaws;


 


(b)                                 Contracts:  enter into any Contract or commitment which
would be a Material Contract if entered into prior to the date hereof, or
violate, amend or otherwise modify or waive any of the terms of any of its
Material Contracts;


 


(c)                                  Intellectual Property:  dispose of, license or transfer to any person
or entity any rights to any Seller Intellectual Property other than
non-exclusive licenses in connection with the sale of Sellers’ products in the
ordinary course of business consistent with past practice;


 


(d)                                 Exclusive Rights:  enter into or amend any agreement pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of Sellers’ products or technology;


 


(e)                                  Dispositions:  sell, lease, license or otherwise dispose of
or encumber any of the Purchased Assets, except for sales of products in the
ordinary course of business consistent with past practice;


 


(f)                                    Payment of Obligations:  pay, discharge or satisfy any Liability
arising other than in the ordinary course of business, other than the payment,
discharge or satisfaction of Liabilities reflected or reserved against in the
Sellers’ Financial Statements;


 


(g)                                 Capital Expenditures:  make any capital expenditures, capital
additions or capital improvements in excess of $100,000 individually or in the
aggregate;


 


(h)                                 Employee Benefit Plans; New
Hires; Pay Increases:  adopt or
amend any Plan, or hire any new consultant or employee, pay any special bonus
or special remuneration to any employee, consultant or director or increase the
salaries, wage rates or compensation of any employee or consultant (other than
as may be required by the terms of any Contract or any Plan or as may be
required by Law;


 


(i)                                     Severance Arrangements:  grant any severance or termination pay (i) to
any director, officer or consultant or (ii) to any other employee except payments
made pursuant to standard written agreements outstanding on the date hereof
(other than as may be required by the terms of any Contract or any Plan or as
may be required by Law, or planned annual increases in the rates of
compensation in the ordinary course of business consistent with past practice);


 


(j)                                     Lawsuits:  commence a lawsuit other than (i) for
the routine collection of bills, (ii) in such cases where Sellers
determine in good faith that failure to commence suit would result in the
material impairment of a valuable aspect of its business, provided that Sellers
consult with the Acquirer prior to the filing of such a suit, or (iii) for
a breach of this Agreement;


 


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(k)           Acquisitions:  acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof;


 


(l)            Taxes:  make or change any material election in
respect of Taxes, adopt or change any material accounting method in respect of
Taxes;


 


(m)          Inventory:  make immaterial purchases of any product for
the primary purpose of changing the aging of the inventory of such product
without a legitimate business purpose (it being understood that such business
purposes can not be to shorten the age of the inventory of such product); or


 


(n)           Other:  take or agree in writing or otherwise to
take, any of the actions described in Section 4.1(a) through Section 4.1(l) above.


 


Section 4.2             Conduct of the Business of the Acquirer.  During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
and the Closing, the Acquirer shall not, and shall not permit any of its
Affiliates to take, or agree to commit to take, (i) any action that would
or is reasonably likely to delay the receipt of, or impact the ability of a
party to obtain, any approval or consent necessary for the consummations of the
transactions contemplated by this Agreement, (ii) any action that would or
is reasonably likely to impair or delay the Closing, including without
limitation, any action that would cause any Governmental or Regulatory Authority
to commence or re-open, as the case may be, a proceeding or investigation with
respect to the transactions contemplated by this Agreement or (iii) without
the prior written consent of the Sellers, any action to solicit for employment
or employ (including as an independent contractor or consultant) any Company
Employee who is party to an employment contract as set forth on Section 4.2
of the Disclosure Schedule.


 


ARTICLE V.



ADDITIONAL AGREEMENTS


 


Section 5.1             Access to Information.  Between the date of this Agreement and the
earlier of the Closing Date or the termination of this Agreement, upon
reasonable notice, and except as determined in good faith to be appropriate to
ensure compliance with any applicable Laws and subject to any applicable privileges
(including the attorney-client privilege) and contractual confidentiality
obligations, the Sellers shall (a) give the Acquirer and its
Representatives reasonable access to all Books and Records of the Sellers
relating to the Business or the Purchased Assets, during normal business hours,
whether located on the premises of the Sellers or at another location, provided
that the Sellers shall have the right to have a representative present during
any such inspection; (b) cause its officers to furnish the Acquirer such
financial, operating, technical and product data and other information with
respect to the Business and Purchased Assets as the Acquirer from time to time
may reasonably request, including financial statements and schedules, for
purposes of preparing to operate the Business following the Closing; provided, however,
that no investigation pursuant to this Section 5.1 shall affect or
be deemed to modify any representation or warranty made by the Sellers herein; provided, further,
that such investigation shall not unreasonably interfere with any of the
businesses, personnel or 


 


31

















 


operations of
the Sellers or any of their Affiliates. 
Materials furnished to the Acquirer pursuant to this Section 5.1
may be used by the Acquirer only for strategic planning purposes relating to
evaluating and accomplishing the transactions contemplated hereby and shall be
subject to the Confidentiality Agreement. 
Notwithstanding anything to the contrary contained herein, prior to the
Closing, without the prior written consent of the Sellers, which shall not be
unreasonably withheld, conditioned or delayed, neither the Acquirer nor any of
its Representatives shall contact any suppliers to, or customers of the Sellers
with respect to the Sellers or the Business; provided,
however, that any such contact
with suppliers or customers of the Sellers must be coordinated by the Sellers
and the Sellers shall be entitled to participate in any such discussions with
suppliers or customers of the Sellers.


 


Section 5.2             Confidentiality.  The parties acknowledge that the Acquirer and
the Sellers have previously executed a non-disclosure agreement dated January 22,
2009 (the “Confidentiality Agreement”), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.


 


Section 5.3             Approvals.  The Sellers shall use commercially reasonable
efforts to obtain all Approvals from Governmental or Regulatory Authorities or
under any of the Contracts or other agreements of the Sellers as may be
required in connection with the Acquisition so as to preserve all rights of and
benefits to the Sellers thereunder and the Acquirer shall provide the Sellers
with such assistance and information as is reasonably required to obtain such
Approvals; provided, however, that Sellers shall not be
required to pay any fees or other payments to any such Governmental or
Regulatory Authorities or any contractual counterparty in order to obtain any
such Approval (other than normal filing fees that are imposed by Law on the
Sellers).


 


Section 5.4             Termination of Security Interest.  Prior to the Closing, the Sellers shall file,
and execute and deliver, all documents necessary to release the Purchased
Assets from any Lien (other than Permitted Liens) and shall provide evidence
reasonably satisfactory to the Acquirer of the release of all such Liens.


 


Section 5.5             Notification of Certain Matters.  The Sellers shall give prompt notice to the
Acquirer, and the Acquirer shall give prompt notice to the Sellers, of the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any condition in Section 7 to not be
satisfied; provided, however, that the delivery of any notice
pursuant to this Section 5.5 shall not limit or otherwise affect
any remedies available to the party receiving such notice.


 


Section 5.6             Expenses.  Except as set forth in Section 1.11
(Transfer Taxes) or in the Transition Services Agreement, all fees and expenses
incurred in connection with the Acquisition, including all legal, accounting,
financial advisory, consulting, fees paid under the Competition Act (Canada)
and all other fees and expenses of third parties (“Third Party Expenses”)
incurred by a party in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated
hereby, shall be the obligation of the respective party incurring such fees and
expenses.


 


Section 5.7             Public Disclosure.  Unless otherwise required by Law (including
federal and state securities laws) or, as to the Acquirer, by the rules and
regulations of the New York 


 


32

















 


Stock Exchange
or, or as to the Sellers and the Guarantor, by the rules and regulations
of the  NASDAQ Global Market, prior to
the Closing Date, no public disclosure (whether or not in response to any
inquiry) of the existence of any subject matter of, or the terms and conditions
of, this Agreement shall be made by any party hereto unless approved by the
Acquirer and the Sellers in writing prior to release; provided, however,
that such approval shall not be unreasonably withheld or delayed.  The parties shall issue their own press
release within one (1) Business Day following the date hereof, each of
which shall be reasonably acceptable to the other party.


 


Section 5.8             Takeover Statutes.  If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, the board of directors of
each Seller will grant such approvals and take such actions as are necessary so
that the transactions contemplated by this Agreement and the Ancillary
Agreements may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate the effects of any Takeover
Statute on any of the transactions contemplated hereby.


 


Section 5.9             Seller Dissolution.  Each Seller hereby covenants that it will
not, nor will it permit its Representatives to, dissolve or take any measures
to cause the dissolution of such Seller at any time prior to one year and one
month after the Closing Date.


 


Section 5.10           Preservation of Books and Records.  The Sellers and their Affiliates shall have
the right to retain copies of all Books and Records of the Business relating to
periods ending on or prior to the Closing Date. 
The Acquirer agrees that each shall preserve and keep, or cause to be
preserved and kept, all original Books and Records in respect of the Business
in the possession of Acquirer or its Affiliates for the shorter of (i) any
applicable statute of limitations, (ii) a period of six years from the
Closing Date and (iii) such date as is 60 days after the notice provided
in the penultimate sentence of this Section 5.10.  During such period, Representatives of the
Sellers and their Affiliates shall, upon reasonable notice and for any
reasonable business purpose, have access during normal business hours to
examine, inspect and copy such Books and Records.  Before the Acquirer or any Affiliate shall
dispose of any of such Books and Records, the Acquirer shall give at least 60
days’ prior written notice of such intention to dispose to the Sellers, and the
Sellers or any of their Affiliates shall be given an opportunity, at their cost
and expense, to remove and retain all or any part of such Books and Records as
they may elect.  Any information provided
pursuant to this Section 5.10 shall be deemed confidential
information as such term is defined in the Confidentiality Agreement and the
obligations set forth in the Confidentiality Agreement shall remain in full
force and effect as to any information provided in accordance with this Section 5.10
until six years following the Closing Date.


 


Section 5.11           Employee Matters.


 


(a)            Offer of Employment.  No later than four (4) Business Days prior
to, and effective as of (and subject to the occurrence of), the Closing Date,
Acquirer will make an offer of employment to not less than 75% of the
individuals employed by the Sellers as of the date hereof (including, without
limitation, each employee of the Sellers then on short-term disability leave,
family or medical leave, military leave or similar approved leave of absence)
(each a “Company Employee”). Such offer of employment will:


 


33

















 


(i)            with
respect to employees of the US Seller, be an offer for “at will” employment and
will: (A) be set forth in offer letters on Acquirer’s standard form, (B) be
subject to and in compliance with Acquirer’s applicable policies and
procedures, including employment background checks and the execution of such
Acquirer’s employee proprietary information and invention assignment agreement,
governing employment conduct and performance, (C) have terms, including
the position and salary, which will be determined by the Acquirer, and (D) supersede
any prior express or implied employment agreements, arrangement or offer letter
in effect prior to the Closing Date. 
Each employee who accepts the Acquirer’s offer of employment will be
referred to herein as a “US Transferred Employee.”  The US Transferred Employees shall be
entitled to benefits that in the aggregate for such US Transferred Employees
are no less favorable than those provided to similarly situated employees of
the Acquirer, taking into account the US Transferred Employees’ performance and
geographic location.  Except to the
extent prohibited by legal requirements, the Sellers will use reasonable
efforts to make available to Acquirer all personnel records relating to active
US Transferred Employees.  Each US
Transferred Employee who is actively at work on the first Business Day
following the Closing Date shall commence employment with the Acquirer on such
date.  Each US Transferred Employee who
is on leave on the first Business Day after the Closing Date and who promptly
and within the time provided by Contract or applicable law returns to active
employment with the Acquirer after the Closing Date shall be treated as having
terminated from Sellers and commenced employment with the Acquirer on such
return date and shall be treated as a US Transferred Employees; and


 


(ii)           with
respect to employees of the Canadian Seller, will be an irrevocable offer of
employment in writing and in a form satisfactory to the Sellers, for a position
comparable to the position held by the offeree immediately prior to the
Closing, and will be on terms and conditions of employment including base
salary or base wages, incentive compensation, severance entitlements, vacation
and benefits, that are substantially similar to those provided by the Canadian
Sellers immediately prior to the Closing Date. 
Each employee of the Canadian Sellers who accepts Acquirer’s offer of
employment will be referred to herein as a “Canadian Transferred Employee.”  Without limitation, a Canadian Transferred
Employee who arrives at his or her then applicable place of employment on the
first Business Day immediately following the Closing Date, or promptly
following conclusion of any sick day, vacation or other absence pending as of
the Closing Date and undertakes to perform her or his duties, will be deemed
for all purposes of this Agreement to have accepted Acquirer’s offer of
employment and shall be treated as a Canadian Transferred Employee.


 


(b)           Service
Credit and Related Terms.  Acquirer
will grant each Transferred Employee with credit for eligibility and vesting
purposes (but not benefit accrual purposes) under each of Acquirer’s Plans (as
defined below) for all periods of service for which such Transferred Employee
was granted credit under a similar Plan in which such Transferred Employee was
eligible to participate immediately prior to the Closing Date, provided that,
with respect to US Transferred Employees, Acquirer will do so only to the
extent permitted under Acquirer’s Plans (as defined below).  For purposes of determining the severance, if
any, and vacation entitlements of each Transferred Employee as of the Closing
Date, Acquirer will take into account all service taken into account under the
severance and vacation plans, respectively, 


 


34

















 


in which such
Transferred Employee was eligible to participate immediately prior to the
Closing Date.  With respect to any
Acquirer’s Plan under which a Transferred Employee is entitled to medical,
dental, hospitalization or other health insurance, Acquirer will grant each
Canadian Transferred Employee and, to the extent permitted, each US Transferred
Employee credit for all co-payments and deductibles paid by such Transferred
Employee in the year in which the Closing Date occurs under a similar
Plan.  Acquirer will use commercially
reasonable efforts to ensure that such Plans will not impose any preexisting
condition limitation under any medical, dental, health or other similar welfare
plan in which Transferred Employees are entitled to participate that would
exclude coverage under such plan for any claim of a Transferred Employee for
which coverage would have been provided under the corresponding Plan.  For purposes of this Section 5.11(b),
the term “Acquirer’s Plan” means an employee benefit plan, program or
arrangement maintained by Acquirer or its affiliates in which a Transferred
Employee is or becomes eligible to participate following the Closing Date.  Sellers agree to provide Acquirer with the
information reasonably required by Acquirer to meet their obligations under
this Section 5.11(b).


 


(c)           Participation
in Plans.  Effective as of the
Closing, the Transferred Employees shall cease to be covered by the Plans.  The Sellers shall retain responsibility for
and continue to pay all medical, life insurance, disability, and other welfare
plan expenses and benefits for each Transferred Employee with respect to claims
incurred by such Transferred Employee or his covered dependents prior to the
Closing.  Expenses and benefits with respect
to claims incurred by Transferred Employees or their covered dependents on or
after the Closing shall be the responsibility of Acquirer.  For purposes of this paragraph, a claim is
deemed incurred by a Transferred Employee (i) in the case of medical or
dental benefits, when the services that are the subject of the claim are
performed; (ii) in the case of life insurance, when the death occurs; (iii) in
the case of long-term disability benefits, when the disability occurs; (iv) in
the case of workers compensation benefits, when the event giving rise to the
benefits occurs; and (v) otherwise, at the time the Transferred Employee
or covered dependent becomes entitled to payment of a benefit (assuming that
all procedural requirements are satisfied and claims applications properly and
timely completed and submitted).


 


(d)           Vacation.  Sellers shall pay each Transferred Employee
for all vacation earned but not taken by such Transferred Employee up to the
Closing Date, as well as all time off with pay then earned and not taken, to
the extent accrued by the Sellers as of the Closing Date.


 


(e)           COBRA.  Seller shall be responsible for providing all
notices and continuation of coverage benefits due under Section 4908B of
the Code and Sections 601 through 609 of ERISA (collectively referred to as “COBRA”)
attributable to a qualifying event with respect to Seller’s group health plans,
and Sellers (or, as provided in Treasury Regulation Section 54.4908B-2,
A-2, any person which is a member of the same group as Sellers) shall following
the Closing Date continue to maintain such group health plans as are necessary
to provide continuation coverage to each covered employee and qualified
beneficiary for the maximum continuation coverage period available to each such
individual. For purposes of the preceding sentence, the terms “continuation
coverage”, “group health plan”, “qualifying event”, “covered employee” and “qualified
beneficiary” shall have the meanings provided for in COBRA.


 


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(f)            Non-Solicit.  Acquirer hereby agrees that, for a period of
one (1) year from the Closing Date, that neither it nor any of Affiliates,
nor any party working on behalf of the Acquirer or its Affiliates, will solicit
for employment (including as an independent contractor or consultant) any
Company Employee that is not a Transferred Employee unless prior to any such
solicitation the Acquirer reimburses the Sellers in full for any severance or
termination payments made to the Company Employee that the Acquirer or its
Affiliates desire to solicit for employment; provided,
however, that the foregoing provision
will not prevent the Acquirer or its Affiliates from soliciting to employ or
employing any Company Employee who contacts the Acquirer or its Affiliates in
response to a widely dispersed employment advertisement published in a
newspaper, periodical or similar publication or website.


 


Section 5.12           Financial Statements.  The Sellers will use commercially reasonable
efforts to cause their management to facilitate on a timely basis (a) the
preparation of financial statements (including pro forma financial statements
if required) as required by Acquirer to comply with applicable SEC regulations,
(b) the review of any Sellers’ audit or review work papers, including the
examination of selected interim financial statements and data, and (c) the
provision of reasonable access to the Sellers’ independent accountants as may
be reasonably requested by Acquirer or their accountants.


 


Section 5.13           Maintenance of Existence; Adequate Funds.  From and after the Closing, the Acquirer
shall preserve, renew and keep in full force and effect its existence, and
shall not take any actions, including paying any dividends, that would render
or is reasonably likely to render the Acquirer insolvent, or unable to pay and
discharge its obligations hereunder or the Assumed Liabilities.


 


Section 5.14           Release of Guaranties.  Prior to and following the Closing Date,
Acquirer shall use commercially reasonable efforts to cause the guaranties made
by any of Sellers’ Affiliates as set forth on Section 5.14 of the
Disclosure Schedule to be released (the “Guaranties”).


 


Section 5.15           Electronic Data.  Prior to the Closing, the Sellers shall be
permitted to delete any and all electronic data that does not relate to the
Business that resides on any computer included in the Purchased Assets and
shall use commercially reasonable efforts to provide Acquirer with electronic
data included in the Purchased Assets relating exclusively to the Sellers or the
Business (and not in any way relating to the Guarantor and its business other
than the Business) such that Acquirer shall have access to electronic data
necessary to operate the Business in all material respects in the manner
presently operated by the Sellers as of the Closing Date.


 


Section 5.16           Debit Memos.  During the 180 day period from and after the
Closing Date, Acquirer shall use commercially reasonable efforts to obtain
acknowledgements by the applicable vendors as to the validity of the actual aggregate
amounts in respect of the debit memos as contemplated by and included within
the definition of “Unresolved Debit Memos” and to collect and realize
upon such debit memos.  During the 180
day period from and after such initial 180 day period, Acquirer shall use
commercially reasonable efforts to collect and realize upon any such remaining
debit memos and, if so collected and realized, shall promptly remit such
proceeds to Sellers.


 


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Section 5.17           Excluded Inventory.  The Acquirer shall have the exclusive right
for a period of twelve months following the Closing Date, and shall use its
commercially reasonable efforts, to sell the Excluded Inventory on consignment
and shall promptly remit ninety percent (90%) of the gross proceeds of any
sales of such Excluded Inventory to the Sellers.  Any Excluded Inventory that remains unsold
following the twelve month anniversary of the Closing shall be returned by the
Acquirer to the Sellers.


 


Section 5.18           Customers and Vendors.  Prior to Closing, the Sellers shall use
commercially reasonable efforts to obtain approval of the transaction from and
assignment of all contracts representing at least 99% or more of all vendors
and customers of the Business for the twelve months ended October 31, 2009
(measured by revenues and expenditures for the eleven months ended September 30,
2009).  In addition, the Sellers shall
inform customers and vendors that the receivables and related returns or
defective inventory relating to the Canadian Seller, the Canadian Business or
the US Seller’s third party PC distribution business shall continue to be
directed to the Sellers following the Closing. The Acquirer shall promptly
remit to the Sellers any and all receivables and related returns or defective
inventory relating to the Canadian Seller, the Canadian Business or the US
Seller’s third party PC distribution business received by the Acquirer
following the Closing.


 


ARTICLE VI.



SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
INDEMNIFICATION PROVISIONS


 


Section 6.1             Survival of Representations,
Warranties, Covenants and Agreements. 
Each party shall have the right to rely fully upon the representations,
warranties, covenants and agreements of the other party contained in this
Agreement or in any instrument delivered pursuant to this Agreement.  The representations, warranties, covenants
and agreements contained in this Agreement or in any instrument delivered
pursuant to this Agreement shall not be affected by any investigation conducted
for or on behalf of Acquirer with respect thereto or any knowledge acquired by
Acquirer or its officers, directors, employees or agents as to the accuracy or
inaccuracy of any such representation or warranty. Except for Sections 2.1
(Organization), 2.2 (Authority), 3.1 (Organization), and 3.2
(Authority) (which shall survive indefinitely), Section 2.18 (Tax)
(which shall survive through the applicable statute of limitations applicable
to claims related thereto) and this Article VI (which shall survive
until all rights and obligations hereunder shall have expired), all of the
representations, warranties, covenants and agreements of the parties contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Closing and continue for eighteen (18) months following the
Closing Date (the “Expiration Date”); provided,
that the covenants and agreements that by their terms apply or are to be
performed in whole or in part after the Closing Date, shall survive for the
period provided in such covenants and agreements, if any, or until fully
performed.  Any claims by either party
based upon fraud or willful misrepresentation shall survive until the
applicable statute of limitations.


 


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Section 6.2            Indemnification Provisions.


 


(a)           Indemnification
by Sellers.  Subject to the
limitations set forth herein, Acquirer and its officers, directors, employees,
agents, and Affiliates (collectively, the “Acquirer Indemnitees”) shall
be indemnified and held harmless by the Sellers from and against any and all
Losses incurred by the Acquirer Indemnitees directly or indirectly as a result
of:


 


(1)           (i) any inaccuracy or breach of a
representation or warranty of the Sellers contained herein as of the date
hereof or (ii) any inaccuracy or breach of a Specified Representation of
the Sellers contained herein as of the Closing Date (provided, that, in the case of each of (i) and (ii), in
the event of any such breach or inaccuracy, for purposes of determining the
amount of any Losses, no effect will be given to any qualification as to “materiality”
or “Material Adverse Effect” contained therein);


 


(2)           any failure by the Sellers to perform or
comply with any covenant contained herein;


 


(3)           any Excluded Liability or Excluded Asset;
and


 


(4)           Sellers’ failure to comply with any
fraudulent transfer laws that may be applicable to the Acquisition.


 


(b)           Indemnification
by Acquirer.  Subject to the
limitations set forth herein, Sellers and their officers, directors, employees,
agents, and Affiliates (collectively, the “Seller Indemnitees”) shall be
indemnified and held harmless by the Acquirer from and against any and all
Losses incurred by the Seller Indemnitees directly or indirectly as a result
of:


 


(1)           any inaccuracy or breach of a representation
or warranty of the Acquirer contained herein as of the date hereof or as of the
Closing Date (provided, that, in
the event of any such breach or inaccuracy, for purposes of determining the
amount of any Losses, no effect will be given to any qualification as to “materiality”
or “material adverse effect” contained therein);


 


(2)           any failure by the Acquirer to perform or
comply with any covenant contained herein;


 


(3)           any Liabilities arising out of ownership of
the Purchased Assets or operation of the Business after the Closing Date other
than the Excluded Assets or Excluded Liabilities; and


 


(4)           any Assumed Liability (including the failure
of the Acquirer to perform or in due course pay and discharge any Assumed
Liability).


 


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(c)            Limitations.


 


(i)            Notwithstanding
any other provision to the contrary, the Indemnifying Party (as defined below)
shall not be required to indemnify, defend or hold harmless any Indemnified
Party (as defined below) (or, if the Indemnified Party is an Acquirer
Indemnitee, all of such Acquirer Indemnitees taken as a whole, or, if the
Indemnified Party is a Seller Indemnitee, all of such Seller Indemnitees taken
as a whole) against, or reimburse any such Indemnified Party for, any Losses
pursuant to Section 6.2(a) or Section 6.2(b) until
the aggregate amount of the Losses of the Indemnified Party exceeds Four
Hundred Fifty Thousand Dollars ($450,000) in the aggregate, after which the
Indemnifying Party shall be obligated for all Losses of the Indemnified Party
from the first dollar.


 


(ii)           Notwithstanding
any other provision to the contrary (other than Section 6.2(c)(iii)),
no Indemnifying Party shall have obligations under Section 6.2(a)(1) or
Section 6.2(b)(1) in excess of thirty percent (30%) of the
Purchase Price, as adjusted pursuant to Section 1.7.


 


(iii)          Any
limitations set forth in this Section 6.2(c) or otherwise
shall not apply to Losses as a result of fraud or willful misrepresentation or
breaches of any Specified Representation. 
Solely with respect to actions grounded in fraud or willful
misrepresentation, (A) the right of a party to be indemnified and held
harmless pursuant to the indemnification provisions in this Agreement shall be
in addition to and cumulative of any other remedy of such party at law or in
equity and (B) no such party shall, by exercising any remedy available to
it under this Article VI, be deemed to have elected such remedy
exclusively or to have waived any other remedy, whether at law or in equity,
available to it.


 


(iv)          Notwithstanding
any other provision herein to the contrary, in the event there exists any
claim, setoff, defense or other right that an Acquirer Indemnitee may at any
time have against Sellers in connection with a claim for indemnification under
this Section 6.2, no right of setoff, claim, defense qualification
or exception shall apply in favor of any Acquirer Indemnitee against any
outstanding payment obligations that may be due by Acquirer to Sellers under
the Subsequent Payments or Earn-Out Payment.


 


(d)           Third
Party Claims.


 


(i)             The Seller Indemnitees or the Acquirer
Indemnitees, as the case may be (the “Indemnified Party”), shall
promptly notify the party or parties potentially liable for such indemnification
(the “Indemnifying Party”) in writing of any pending or threatened
claim, demand or circumstance that the Indemnified Party has determined has
given or would reasonably be expected to give rise to a right of
indemnification under this Agreement (including a pending or threatened claim
or demand asserted by a third party against an Indemnified Party, such claim
being a “Third Party Claim”), describing in reasonable detail the facts
and circumstances with respect to the subject matter of such claim, demand or
circumstance (the “Notice of Claim”). 
The Indemnifying Party shall have the right (but not the obligation) to
assume and control the defense of any Third Party Claim and to retain (at the
Indemnifying Party’s expense) counsel of its choice, reasonably acceptable to
the Indemnified Party, to represent the Indemnified Party; 


 


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provided, however, that
this option shall not be available to the Indemnifying Party for Third Party
Claims (i) initiated by any of the then fifteen major customers and
suppliers of the Business or (ii) which may result in criminal
proceedings, injunctions or other equitable remedies in respect of Acquirer or
its Affiliates.  The Indemnifying Party
shall have ten (10) days from the receipt of the Notice of Claim to notify
the Indemnified Party whether or not it desires to defend such Third Party
Claim failing which the Indemnifying Party shall be deemed to have waived such
option. The party assuming defense of a Third Party Claim is hereinafter
referred to as the “Controlling Party” and the other party as the “Co-Party”.


 


(ii)           In
defending the Third Party Claim, the Controlling Party shall take all steps
reasonably necessary in the defense or settlement of such Third Party Claim.
The Co-Party shall take such actions as reasonably necessary to cooperate with
the Controlling Party and its counsel in defending such Third Party Claim.  The Controlling Party shall keep the Co-Party
reasonably informed of the development of the underlying claim.  The Controlling Party shall allow the
Co-Party a reasonable opportunity to participate in the defense of such Third
Party Claim with its own counsel and at its own expense. In the case where the
Acquirer is the Co-Party, the Co-Party shall have the right to participate, at
its sole cost and expense in the defense of a Third Party Claim using its own
counsel.


 


(iii)          The
Controlling Party shall be authorized to consent to a settlement of, or the
entry of any judgment arising from, any Third Party Claim, without the consent
of the Co-Party, provided that the Controlling Party shall (i) pay or
cause to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness of such settlement (subject to Section 6.2(c),
if applicable), (ii) not encumber any of the material assets of an
Indemnified Party or agree to any restriction or condition that would apply to
or materially adversely affect any Indemnified Party or the conduct of any
Indemnified Party’s business and (iii) obtain, as a condition of any
settlement or other resolution, a complete release of any Indemnified Party
potentially affected by such Third Party Claim.


 


(e)            Other Claims.  In the event the Indemnifying Party receives
a notice of a claim for indemnity from the Indemnified Party pursuant to Section 6.2(a) or
Section 6.2(b) that does not involve a Third Party Claim, the
Indemnifying Party shall notify the Indemnified Party within thirty (30) days
following its receipt of such notice if the Indemnifying Party disputes its
liability to the Indemnified Party under this Article VI.  If the Indemnifying Party does not so notify
the Indemnified Party, the claim specified by the Indemnified Party in such
notice shall be conclusively deemed to be a liability of the Indemnifying Party
under this Article VI, and the Indemnifying Party shall pay,
subject to the limitations set forth in Section 6.2(c), if
applicable, the amount of such liability to the applicable Indemnified Party on
demand or, in the case of any notice in which the amount of the claim (or any
portion of the claim) is estimated, on such later date when the amount of such
claim (or such portion of such claim) becomes finally determined.  If the Indemnifying Party has timely disputed
its liability with respect to such claim as provided above, the Indemnifying
Party and the applicable Indemnified Party shall resolve such dispute in
accordance with Section 9.10.


 


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(f)            Exclusive Remedy.  Except with respect to any equitable remedies
pursuant to Section 9.13, the Sellers and the Acquirer acknowledge
and agree that, except in the case of fraud or willful misrepresentation,
following the Closing, the indemnification provisions of this Section 6.2
shall be the sole and exclusive remedies of any Indemnified Party,
respectively, for any Losses (including any Losses from claims for breach of
contract, warranty, tortious conduct (including negligence) or otherwise and
whether predicated on common law, statute, strict liability, or otherwise) that
it may at any time suffer or incur, or become subject to, as a result of, or in
connection with, any breach of any representation or warranty in this Agreement
by the Sellers or the Acquirer, or any failure by the Sellers or the Acquirer
to perform or comply with any covenant or agreement set forth herein; provided, however,
nothing in this Article VI shall limit Acquirer’s ability to adjust
the Purchase Price in accordance with the terms and conditions set forth
herein.


 


(g)           The Sellers and the Acquirer agree, for themselves
and on behalf of their respective Affiliates and Representatives, that with
respect to each indemnification obligation in this Agreement in any case where
an Indemnified Party recovers from a third Person any amount in respect of a
matter for which the Indemnifying Party has indemnified it pursuant to this Section 6.2,
such Indemnified Party shall promptly pay over to the Indemnifying Party the
amount so recovered (after deducting therefrom the amount of expenses incurred
by it in procuring such recovery), but not in excess of the sum of (i) any
amount previously paid by the Indemnifying Party to or on behalf of the
Indemnified Party in respect of such claim and (ii) any amount expended by
the Indemnifying Party in pursuing or defending any claim arising out of such
matter.


 


(h)           Limitation on Liability.  In no event shall any party have any
liability to the other (including under this Section 6.2) for any
consequential, special, incidental, or indirect damages or similar items
(including diminution of value or loss of business reputation or opportunity
relating to a breach or alleged breach hereof); provided that such limitation
with respect to lost profits shall not limit either party’s right to recover
contract damages in connection with the other party’s failure to close in
violation of this Agreement.


 


(i)            Treatment of Payments.  To the extent permitted by law, the parties
agree to treat payments made under this Article VI as adjustments
to the Purchase Price.


 


ARTICLE VII.




CONDITIONS TO THE CLOSING


 


Section 7.1            Conditions to
Obligations of Each Party to Effect the Closing.  The respective obligations of each party to
this Agreement to effect the Acquisition shall be subject to the satisfaction
at or prior to the Closing of the following condition:  no temporary restraining order, preliminary
or permanent injunction or other Order issued by any court of competent
jurisdiction or Governmental or Regulatory Authority or other legal or
regulatory restraint or prohibition preventing the consummation of the
Acquisition shall be in effect; nor shall there be any action taken, or any Law
or Order enacted, entered, enforced or deemed applicable to the Acquisition or
the other transactions contemplated by the terms of this Agreement that would
prohibit the consummation of the Acquisition.


 


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Section 7.2            Additional
Conditions to Obligations of the Sellers.  The obligations of the Sellers to consummate
the Acquisition and the other transactions contemplated by this Agreement shall
be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, exclusively by
the Sellers:


 


(a)           Representations and Warranties.  The representations and warranties of
Acquirer contained in this Agreement shall be true and correct in all respects
as of the date of this Agreement and shall be accurate in all material respects
as of the Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate as of such specified
earlier date); provided, however,
that, for purposes of determining the accuracy of such representations and
warranties, all qualifications and exceptions referring to a “material adverse
change in the business or condition of Acquirer” or a “material adverse effect
on Acquirer” and other materiality qualifications and materiality exceptions
contained in such representations and warranties shall be disregarded.


 


(b)           Performance.  Acquirer shall have performed and complied
with in all material respects each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Acquirer at or before
the Closing.


 


(c)           Acquirer Officers’ Certificates.  Acquirer shall have delivered to the Sellers
certificates, dated the Closing Date and executed by the President or Chief
Executive Officer of the Acquirer, substantially in the form set forth in Exhibit B-1
hereto (the “Acquirer Officers’ Certificate”), certifying that the
matters set forth in Section 7.2(a) and (b) have
been satisfied; and certificates, dated the Closing Date and executed by the
Secretary of the Acquirer, substantially in the form set forth in Exhibit B-2
hereto (the “Acquirer Secretary’s Certificate”).


 


(d)           Assignment and Assumption Agreement.  The Acquirer shall have executed and
delivered an Assignment and Assumption Agreement substantially in the form set
forth in Exhibit A (the “Assignment and Assumption Agreement”).


 


Section 7.3            Additional
Conditions to the Obligations of the Acquirer.  The obligations of Acquirer to consummate the
Acquisition and the other transactions contemplated by this Agreement shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, exclusively by Acquirer:


 


(a)           Representations
and Warranties.


 


(i)            The representations and
warranties of the Sellers contained in this Agreement, but not including the
Specified Representations, shall be accurate (without giving effect to any
limitation or qualification as to “materiality” or “Material Adverse Effect”
set forth therein) as of the Closing Date as if made on and as of the Closing
Date (other than representations and warranties which by their express terms
are made solely as of a specified earlier date, which shall be accurate as of
such specified earlier date), except to the extent that any breaches of such
representations and warranties have not had or would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.


 


42





















 


(ii)           The Specified
Representations of the Sellers contained in this Agreement shall be accurate in
all material respects (other than Section 2.7(a)(i) which
shall be accurate in all respects) as of the Closing Date as if made on and as
of the Closing Date (other than representations and warranties which by their
express terms are made solely as of a specified earlier date, which shall be
accurate as of such specified earlier date); provided,
however, that, for purposes of
determining the accuracy of such Specified Representations, any limitation or
qualification as to “materiality” or “Material Adverse Effect” set forth
therein shall be disregarded.


 


(b)           Performance.  The Sellers shall have performed and complied
with in all material respects each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Sellers on or
before the Closing Date.


 


(c)           Sellers Officers’ Certificates.  The Sellers shall have delivered to Acquirer
a certificate, dated the Closing Date and executed by the President or Chief
Executive Officer of the Sellers, substantially in the form set forth in Exhibit C-1
hereto (the “Sellers Officers’ Certificate”), certifying that the
matters set forth in Section 7.3(a) and (b) have
been satisfied; and a certificate, dated the Closing Date and executed by the
Secretary of the Sellers, substantially in the form set forth in Exhibit C-2
hereto (the “Sellers Secretary’s Certificate”).


 


(d)           Consents.  Except as set forth on Section 7.4(d) of
the Disclosure Schedule, each of the Consents shall be in full force and effect
as of the Closing Date.


 


(e)           Bill of Sale.  The Sellers shall have executed and delivered
a Bill of Sale substantially in the form set forth in Exhibit D (the “Bill
of Sale”).


 


(f)            Assignment and Assumption Agreement.  The Sellers shall have executed and delivered
the Assignment and Assumption Agreement.


 


(g)           Satisfaction of Creditors.  The Sellers shall provide evidence reasonably
satisfactory to Acquirer that all outstanding Liens or security interests held
by the Persons identified on Section 7.4(g) of the Disclosure
Schedule on or related to the Purchased Assets have been satisfied or released
and the Sellers shall have taken all steps necessary to terminate all UCC
financing statements which have been filed with respect to such Liens or other
security interests.


 


(h)           Agreements.  Each of the Transition Services Agreement,
Distribution Agreement, the Sublease, the Trademark Assignment and the Domain
Name Assignment shall become effective in accordance with their respective
terms as of the Closing.


 


ARTICLE VIII.



TERMINATION, AMENDMENT AND WAIVER


 


Section 8.1            Termination.  Except as provided in Section 8.2,
this Agreement may be terminated and the Acquisition abandoned at any time prior
to the Closing Date:


 


(a)           by mutual agreement of the Sellers and Acquirer;


 


43





















 


(b)           by the Acquirer or the Sellers if:  (i) the Closing has not occurred before
5:00 p.m. (Pacific Time) on April 30, 2010 (the “End Date”) (provided, however, that
the right to terminate this Agreement under this Section 8.1(b)(i) shall
not be available to any party whose willful failure to fulfill any obligation
hereunder has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date); (ii) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Acquisition; or (iii) there shall be any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Acquisition by
any Governmental or Regulatory Authority that would make consummation of the
Acquisition illegal;


 


(c)           by Acquirer if there shall be any action taken, or
any Law or Order enacted, promulgated or issued or deemed applicable to the
Acquisition, by any Governmental or Regulatory Authority, which would (i) prohibit
Acquirer’s ownership or operation of all or any material portion of the
business of the Sellers or (ii) compel Acquirer to dispose of or hold separate
all or any material portion of the Purchased Assets as a result of the
Acquisition;


 


(d)           by Acquirer if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement
which are capable of being cured, and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Sellers, and the Sellers are not using their commercially
reasonable efforts to cure such breach, or have not cured such breach within
thirty (30) days after notice of such breach to the Sellers, that would cause
any of the conditions set forth in Section 7.3 not to be satisfied,
and such condition is incapable of being satisfied by the End Date; or


 


(e)           by the Sellers if they are not in material breach of
their representations, warranties, covenants and agreements under this
Agreement which are capable of being cured, and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Acquirer, and the Acquirer is not using its commercially reasonable
efforts to cure such breach, or has not cured such breach within thirty (30)
days after notice of such breach to the Acquirer, that would cause any of the
conditions set forth in Section 7.2 not to be satisfied, and such
condition is incapable of being satisfied by the End Date.


 


Section 8.2            Notice; Effect
of Termination.


 


(a)           Any party desiring to terminate this Agreement
pursuant to Section 8.1 shall give written notice of such
termination to the other party or parties, as the case may be, to this
Agreement.  The Confidentiality Agreement
shall not be affected by the termination of this Agreement and shall continue
in full force and effect in accordance with its terms.


 


(b)           Other than as set forth in this Section 8.2(b),
in the event of a valid termination of this Agreement as provided in Section 8.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Acquirer or the Sellers, or their respective
officers, directors or shareholders or Affiliates, provided,
however, that nothing in this Agreement
shall relieve either the Sellers or the Acquirer from liability for willful
breach or fraud.


 


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Section 8.3             Amendment.  No provision of this Agreement may be
amended, supplemented or modified except by a written instrument signed by all
parties to this Agreement.  No consent
from any Indemnified Party under Section 6.2 (other than the parties
to this Agreement) shall be required in order to amend this Agreement.


 


Section 8.4             Extension;
Waiver.  At any time prior to the
Closing Date Acquirer and the Sellers may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto, and (c) waive compliance with any of the agreements, covenants or
conditions for the benefit of such party contained herein.  Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.


 


ARTICLE IX.



MISCELLANEOUS PROVISIONS


 


Section 9.1             Notices.  All notices, requests and other
communications hereunder must be in writing and will be deemed to have been
duly given only if delivered personally against written receipt or by facsimile
transmission against facsimile confirmation or mailed by internationally
recognized overnight courier prepaid, to the parties at the following addresses
or facsimile numbers:


 


	
  If to Acquirer to:

  	
   

  	
  Synnex Corporation

  44201 Nobel Drive

  Fremont, CA 94538 

  Telephone No.: (510) 668-3668 

  Facsimile No.: (510) 668- 3707 

  Attn: General Counsel

  
	
   

  	
   

  	
   

  
	
  with a copy (which shall not constitute notice)
  to:

  	
   

  	
  Pillsbury Winthrop Shaw Pittman LLP 

  2475 Hanover Street 

  Palo Alto CA 94304 

  Telephone No.: (650) 233-4500 

  Facsimile No.: (650) 233-4545 

  Attn: Allison Leopold Tilley, Esq.

  
	
   

  	
   

  	
   

  
	
  If to the Sellers or Guarantor to:

  	
   

  	
  c/o Take-Two Interactive Software, Inc. 

  622 Broadway 

  New York, NY 10012 

  Telephone No.: (646) 536-2842 

  Facsimile No.: (646) 536-2926 

  Attn: General Counsel

  



 


45

















 


	
  with a copy (which shall not constitute notice)
  to:

  	
   

  	
  Willkie Farr & Gallagher LLP 

  787 Seventh Avenue 

  New York, New York 10019 

  Telephone No.: (212) 728-8129 

  Facsimile No.: (212) 728-9129 

  Attn: Adam M. Turteltaub, Esq.

  



 


All such notices, requests and other communications
will (a) if delivered personally to the address as provided in this Section 9.1,
be deemed given upon delivery if such date of delivery is a Business Day, if
not such notice will be deemed given on the next Business Day, (b) if
delivered by facsimile transmission to the facsimile number as provided for in
this Section 9.1, be deemed given upon facsimile confirmation
unless such facsimile is received after 5:00 p.m. (recipient’s local
time), in which case it shall be deemed delivered at 9:00 a.m. (recipient’s
local time) on the next Business Day, and (c) if delivered by overnight
courier to the address as provided in this Section 9.1, be deemed
given upon receipt (in each case regardless of whether such notice, request or
other communication is received by any other Person to whom a copy of such
notice is to be delivered pursuant to this Section 9.1).  Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party hereto; provided, however, that
such notice will be effective on the later of (i) 5 Business Days after
such notice is delivered or (i) the date specified in such notice.


 


Section 9.2             Guaranty.  Guarantor shall be responsible for and hereby
guarantees the full, complete and timely compliance with and performance,
subject to the terms and conditions applicable to the Sellers hereunder, of all
of the agreements, covenants and obligations of the Sellers under this
Agreement, and agrees to be subject to the terms and conditions of this
Agreement applicable to the Sellers (including, but not limited to, Sections
9.9 and 9.10).  The guaranty
described in this Section 9.2 shall be deemed to include, but shall
not be limited to, Guarantor’s obligation to satisfy any and all present and
future payment obligations of the Sellers arising in connection with this
Agreement and the Ancillary Agreements, in each case, when and to the extent
that, any of the same shall become due and payable or performance of or
compliance with any of the same shall be required.  The guaranty described in this Section 9.2
shall remain in full and effect and shall be binding on Guarantor and its
successor and assigns until all of the obligations of the Sellers hereunder and
under any Ancillary Agreements have been satisfied in full.  Guarantor unconditionally waives all notices
and demands that may be required by applicable law or otherwise to preserve any
rights against the Guarantor under the guaranty described in this Section 9.2,
including notice of the acceptance of this Agreement, the Ancillary Agreements
or such guaranty and right of diligence, presentment, demand, notice of
dishonor, protest, filing of any claim, notice of nonpayment and all other
notices and demands. Guarantor agrees that neither Acquirer nor any Indemnified
Party shall be required first to proceed against the Sellers or first to
realize upon or exhaust any or all remedies that Acquirer or any such
Indemnified Party may have against the Sellers in seeking enforcement of the
obligations of Acquirer under this Agreement or the Ancillary Agreements, or in
seeking enforcement of the obligations of Guarantor under this Section 9.2.


 


46





















 


Section 9.3            Entire
Agreement.  This
Agreement and the Exhibits and Schedules hereto, including the Disclosure
Schedule, constitute the entire Agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect and shall survive any termination of this Agreement or the
Closing in accordance with its terms.


 


Section 9.4             Further
Assurances; Post-Closing Cooperation.  At any time or from time to time after the
Closing, each party shall execute and deliver to the other parties such other
documents and instruments, provide such materials and information and use
commercially reasonable efforts to take such other actions as the other parties
may reasonably request to consummate the transactions contemplated by this
Agreement and otherwise to cause the other parties to fulfill their obligations
under this Agreement and the transactions contemplated hereby; provided, however,
that no party shall be required to provide or cause to be provided any data or
information if doing so would result in the incurrence of an unreasonable
internal disruption and/or expense by such party.


 


Section 9.5             Remedies.  Except as otherwise provided herein, all
remedies, either under this Agreement or by Law or otherwise afforded, will be
cumulative and not alternative.


 


Section 9.6             Third Party
Beneficiaries.  The terms
and provisions of this Agreement are intended solely for the benefit of each
party hereto and their respective successors or permitted assigns, and it is
not the intention of the parties to confer third-party beneficiary rights, and
this Agreement does not confer any such rights, upon any other Person other
than any Person entitled under the terms of this Agreement to indemnity under Article VI.


 


Section 9.7             Invalid
Provisions.  If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under any present or future Law, and if the rights or obligations of any party
hereto under this Agreement will not be materially and adversely affected
thereby, (a) such provision will be fully severable, (b) this Agreement
will be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, (c) the remaining provisions
of this Agreement will remain in full force and effect and will not be affected
by the illegal, invalid or unenforceable provision or by its severance herefrom
and (d) in lieu of such illegal, invalid or unenforceable provision, there
will be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.


 


Section 9.8             Disclosure
Schedule.  Any
disclosure with respect to a Section or Schedule of this Agreement,
including any Section of the Disclosure Schedule, shall be deemed to be
disclosed for other Sections and Schedules of this Agreement, including any Section of
the Disclosure Schedule, to the extent that such disclosure sets forth facts in
sufficient detail so that the relevance of such disclosure would be reasonably
apparent to a reader of such disclosure. 
Matters reflected in any Section of this Agreement, including any Section of
the Disclosure Schedule, are not necessarily limited to the matters required by
this Agreement to be so reflected.  Such
additional matters are set forth for informational purposes and do not
necessarily include other matters of a similar nature.  No reference to or disclosure of any item or
other matter in any Section or Schedule of this Agreement, including any Section of
the Disclosure Schedule, shall 


 


47

















 


be construed as an admission or indication that such item or other
matter is material or that such item or other matter is required to be referred
to or disclosed in this Agreement. 
Without limiting the foregoing, no such reference to or disclosure of a
possible breach or violation of any Contract, Law or Order shall be construed
as an admission or indication that a breach or violation exists or has actually
occurred.


 


Section 9.9            Governing Law.  This Agreement, the Ancillary Agreements and
any other closing documents shall be governed by and construed in accordance
with the domestic laws of the State of Delaware, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.


 


Section 9.10          Dispute
Resolution.


 


(a)           Except with respect to any request for equitable
relief (including interim relief) by the Sellers on or prior to the Closing
Date, any dispute, controversy or claim arising out of or relating to the
transactions contemplated by this Agreement, or the validity, interpretation,
breach or termination of this Agreement or the Ancillary Agreements, including
claims seeking redress or asserting rights under any Law (a “Dispute”),
shall be resolved in accordance with the procedures set forth in this Section 9.10.  Until completion of such procedures, no party
may take any action to force a resolution of a Dispute by any judicial or
similar process, except to the limited extent necessary to (i) avoid
expiration of a claim that might eventually be permitted by this Agreement or (ii) obtain
interim relief, including injunctive relief, to preserve the status quo or
prevent irreparable harm.


 


(b)           Any party seeking resolution of a Dispute shall
first submit the Dispute for resolution by mediation pursuant to the Center of
Public Resources Model Procedure for Mediation of Business Disputes as then in
effect.  Mediation will continue for at
least 60 days unless the mediator chooses to withdraw sooner.


 


(c)           All offers of compromise or settlement among the
parties or their Representatives in connection with the attempted resolution of
any Dispute shall be deemed to have been delivered in furtherance of a Dispute
settlement and shall be exempt from discovery and production and shall not be
admissible in evidence (whether as an admission or otherwise) in any proceeding
for the resolution of the Dispute.


 


(d)           Acquirer and the Sellers agree that if any Dispute
is not resolved by mediation undertaken pursuant to this Section 9.10,
such Dispute shall be resolved only in the Courts of the State of Delaware
sitting in the County of New Castle or the United States District Court for the
District of Delaware and the appellate courts having jurisdiction of appeals in
such courts.


 


(e)           Unless otherwise required by Law (including, without
limitation, securities laws) or the rules and regulations of the New York
Stock Exchange, the parties to this Agreement undertake and agree that all
mediation proceedings conducted with reference to this Section 9.10
will be kept strictly confidential.  This
confidentiality undertaking shall cover all non-public information disclosed in
the course of such proceedings, as well as any agreement 


 


48





















 


that is reached during the proceedings. 
Subject to the limitations described in this Section 9.10(e),
information covered by the confidentiality undertaking in this Section 9.10(e) may
not, in any form, be disclosed by any party to a third party without the prior
written consent of the other parties hereto.


 


Section 9.11           Headings.  The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.


 


Section 9.12           Counterparts.  This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.


 


Section 9.13           Specific
Performance.  Each party
acknowledges and agrees that the breach of this Agreement would cause
irreparable damage to the other parties hereto and that no party will have an
adequate remedy at law.  Therefore, the
obligations of each party under this Agreement shall be enforceable by a decree
of specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith, including to prevent breaches of this Agreement, and this right
shall include the right of the parties to cause the transactions contemplated
hereby to be consummated in each case without posting a bond or undertaking.  Each party hereto waives any defenses in any
action for specific performance, including that a remedy at Law would be
adequate.  Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.  Each of the parties hereto expressly
disclaims that it is owed any duties not expressly set forth in this Agreement,
and waives and releases any and all tort claims and causes of action that may
be based upon, arise out of or relate to this Agreement, or the negotiation,
execution or performance of this Agreement.


 


Section 9.14           Assignment.  This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of each party hereto, but,
no rights, obligations or liabilities hereunder shall be assignable by any
party without the prior written consent of the other parties, and any purported
assignment in violation of this Section 9.14 shall be null and void
ab initio; provided, however, prior to the Closing, Acquirer
may elect (upon written notice sent to the Sellers) to assign all or any part
of its rights and obligations under this Agreement to any Affiliate of Acquirer
(including any Subsidiary formed for such purpose) and to cause such Affiliate to
perform the obligations of Acquirer under this Agreement; provided, further,
that no such assignment shall otherwise vary or diminish any of Acquirer’s
obligations under this Agreement to the extent its Affiliate fails to duly
perform the obligations of Acquirer under this Agreement; provided, further
that nothing contained in this Agreement shall limit or restrict Sellers or
Guarantor from making a collateral assignment of their rights hereunder for the
benefit of the lenders under the Credit Agreement.  Acquirer has informed the Sellers that prior
to the Closing that it currently intends to assign its rights and obligations
hereunder with respect to the Purchased Assets and Assumed Liabilities relating
to the Canadian Business to a Canadian domiciled Subsidiary.


 


49

















 


ARTICLE X.



DEFINITIONS


 


Section 10.1           Definitions.  As used in this Agreement, the following
defined terms shall have the meanings indicated below:


 


“Accounting Procedures” means Sellers’ accounting
policies, procedures, estimates and calculations, consistently applied in
accordance with GAAP; provided, however, that with respect to the calculation of inventory
reserves, the procedures set forth on Section 10(a) of the
Disclosure Schedule shall be used.  In
addition, for purposes of calculating Tangible Net Worth, (A) in the event
that inventory included in the Purchased Assets at Closing (based on the value
derived from the immediately preceding sentence) is valued at not less than
Thirty Three Million Dollars ($33,000,000), (i) any such inventory in
excess of Thirty Three Million Dollars ($33,000,000) in value shall be
discounted ten percent (10%) and (ii) any such inventory Aged more than
180 days in excess of Eight Million Dollars ($8,000,000) in value shall be
discounted ten percent (10%) (in addition to any discount applied to such
inventory pursuant to clause (i) above), or (B) in the event that
inventory included in the Purchased Assets at Closing (based on the value
derived from the immediately preceding sentence) is valued at less than Thirty
Three Million Dollars ($33,000,000), any such inventory Aged more than 180 days
in excess of Eight Million Dollars ($8,000,000) in value shall be discounted
twenty percent (20%), in each case, such inventory value shall be calculated
net of applicable reserves in accordance with the procedures set forth on Section 10(a) of
the Disclosure Schedule (any such excess inventory in clauses (A)(i), (A)(ii) or
(B), is referred to herein as the “Excess Inventory”).  In addition, for purposes of illustration, Section 10(a) sets
forth an example calculation of inventory and inventory reserves to be included
in the calculation of Tangible Net Worth at Closing.


 


“Accounting Referee” has the meaning ascribed
to it in Section 1.7(a)(iv).


 


“Acquirer” has the meaning ascribed to it in
the preamble hereto.


 


“Acquirer Indemnitee” has the meaning
ascribed to it in Section 6.2(a).


 


“Acquirer Officers’ Certificates” has the
meaning ascribed to it in Section 7.2(c).


 


“Acquirer Secretary’s Certificate” has the
meaning ascribed to it in Section 7.2(c).


 


“Acquirer’s Plan” has the meaning ascribed to
it in Section 5.11(b).


 


“Acquisition” has the meaning ascribed to it
in the Recitals hereto.


 


“Affiliate” means, with respect to any Person,
any Person which controls, is controlled by or is under common control with,
such Person, either directly or indirectly through one or more intermediaries,
with “control” for such purpose meaning the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of such Person’s voting securities or
voting interests, by Contract or otherwise.


 


50
















 


“Aged” means, in connection with the
determination of the age of any product in inventory, the latest date of
purchase by a Seller of product with that same SKU as the product in inventory
for which the age of such inventory is being determined.  For illustration purposes, if a Seller
purchased product with the same SKU on January 1, 2009,  February 1, 2009 and April 1, 2009,
as of April 2, 2009, all units of inventory of that product shall be Aged
one day.


 


“Aged Excess Inventory Value” means, in the
event that inventory Aged more than 180 days included in the Purchased Assets
prior to giving effect to any inventory excluded pursuant to Section 1.2(c) is
valued (calculated in accordance with the Accounting Procedures, including
giving effect to all discounts included therein) at Closing at not less than
Eight Million Dollars ($8,000,000), an amount equal to:  (A)(i) the value (calculated in
accordance with the Accounting Procedures, including giving effect to all
discounts included therein) of the inventory Aged more than 180 days at Closing
less (ii) Eight Million Dollars ($8,000,000), multiplied by (B) eighty
percent (80%).  In the event that
inventory Aged more than 180 days included in the Purchased Assets prior to
giving effect to any inventory excluded pursuant to Section 1.2(c) is
valued (calculated in accordance with the Accounting Procedures, including
giving effect to all discounts included therein) at Closing at less than or
equal Eight Million Dollars ($8,000,000), the Aged Excess Inventory Value shall
be equal to zero.


 


“Agreement” means this Agreement, including
(unless the context otherwise requires) the Exhibits and the Disclosure
Schedule and the certificates and instruments delivered in connection herewith,
or incorporated by reference, as the same may be amended or supplemented from
time to time in accordance with the terms hereof.


 


“Ancillary Agreements” has the meaning
ascribed to it in Section 2.2.


 


“Approval” means any approval, authorization,
consent, permit, qualification or registration, or any waiver of any of the
foregoing, required to be obtained from or made with, or any notice, statement
or other communication required to be filed with or delivered to, any
Governmental or Regulatory Authority or any other Person.


 


“Assets and Properties” of any Person means
all assets and properties of every kind, nature, character and description
(whether real, personal or mixed, whether tangible or intangible, whether
absolute, accrued, contingent, fixed or otherwise and wherever situated),
including the goodwill related thereto, operated, owned, licensed or leased by
such Person, including cash, cash equivalents, Investment Assets, accounts and
notes receivable, chattel paper, documents, instruments, general intangibles,
real estate, equipment, inventory, goods and Intellectual Property.


 


“Assignment and Assumption Agreement” has the
meaning ascribed to it in Section 7.2(d).


 


“Assumed Liabilities” has the meaning
ascribed to it in Section 1.4.


 


“Bill of Sale” has the meaning ascribed to it
in Section 7.3(e).


 


“Books and Records” means all files,
documents, instruments, papers, books and records relating to the business or
condition, financial or otherwise, of a Person, including 


 


51

















 


financial statements,
internal reports, Tax Returns and related work papers and letters from
accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs (including
data processing files and records), retrieval programs, operating data and
plans and environmental studies and plans but excluding Personal Information.


 


“Business” has the meaning ascribed to it in
the Recitals hereto.


 


“Business Combination” means, with respect to
any Person, (a) any merger, consolidation, share exchange, reorganization
or other business combination transaction to which such Person is a party, (b) any
sale, dividend, split or other disposition of any capital stock or other equity
interests of such Person (except for issuances of common stock upon conversion
of preferred stock outstanding on the date hereof or upon the exercise of
options or warrants outstanding on the date hereof or issued in accordance with
the covenants of this Agreement), (c) any tender offer (including a self
tender), exchange offer, recapitalization, restructuring, liquidation,
dissolution or similar or extraordinary transaction, (d) any sale,
dividend or other disposition of all or a material or significant portion of
the Assets and Properties of such Person (including by way of exclusive license
or joint venture formation, but excluding non-exclusive licenses in connection
with the sale of Sellers’ products in the ordinary course of business
consistent with past practice) or (e) the entering into of any agreement
or understanding or the granting of any rights or options, with respect to any
of the foregoing.


 


“Business Day” means a day other than
Saturday, Sunday or any day on which banks located in San Francisco, California
or New York, New York are authorized or obligated to close.


 


“Canadian Business” has the meaning ascribed
to it in the Recitals hereto.


 


“Canadian Seller” has the meaning ascribed to
it in the Preamble hereto.


 


“Canadian Transferred Employees” has the
meaning ascribed to it in Section 5.11(a)(ii).


 


“Cash Assets” means any cash on hand, cash in
bank or other accounts, readily marketable securities, and other
cash-equivalent liquid assets of any nature.


 


“Closing” means the closing of the
transactions contemplated by Section 1.9.


 


“Closing Date” has the meaning ascribed to it
in Section 1.9.


 


“Closing Date Tangible Net Worth” means the
Tangible Net Worth of the Business as of the Closing Date.


 


“Closing Payment” has the meaning ascribed to
it in Section 1.6(b).


 


“COBRA” has the meaning ascribed to it in Section 5.11(e).


 


52

















 


“Code” means the United States Internal
Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.


 


“Confidentiality Agreement” has the meaning
ascribed to it in Section 5.2.


 


“Company Employee” has the meaning ascribed
to it in Section 5.11.


 


“Contract” means any written or oral
contract, agreement, instrument, order, arrangement, commitment or
understanding of any nature, including sales orders, purchase orders, leases,
subleases, data processing agreements, maintenance agreements, license
agreements, sublicense agreements, loan agreements, promissory notes, bonds,
indentures, security agreements, pledge agreements, deeds, mortgages,
guaranties, indemnities, warranties, employment agreements, consulting
agreements, sales representative agreements, joint venture agreements, buy-sell
agreements, options, warrants, obligations, promises or undertakings (in each
case, whether express or implied) to which any Person or any part of its
property is bound, but specifically excludes any Plans.


 


“Controlling Party” has the meaning ascribed
to it in Section 6.2(d)(i).


 


“Co-Party” has the meaning ascribed to it in Section 6.2(d)(i).


 


“Consents” has the meaning ascribed to it in
the Recitals hereto.


 


“Credit Agreement” means, that certain
Amended and Restated Credit Agreement by and among Take-Two Interactive
Software, Inc. and certain of its subsidiaries party thereto, as
Borrowers, and certain of its subsidiaries party thereto, as Guarantors, the
Lenders party thereto, Wells Fargo Foothill, Inc., as the Arranger and
Administrative Agent, and Citicapital Commercial Corporation, as the
Syndication Agent, dated as of November 16, 2007, as amended, supplemented
or otherwise modified from time to time.


 


“Current Inventory Adjustment Amount” means,
as of the Closing Date, if the value of inventory included in the Purchased
Assets at Closing, calculated in accordance with the Accounting Procedures
(prior to applying any discounts to such value in accordance with the second
sentence of the definition of Accounting Procedures), Aged less than thirty
(30) days (the “Current Inventory Value”) is less than Five Million
Dollars ($5,000,000), an amount equal to: (i) seven and one-half percent
(7.5%) multiplied by (ii)(A) Five Million Dollars ($5,000,000) less (B) the
Current Inventory Value.  For the
avoidance of doubt, in the event the Current Inventory Value is equal to or in
excess of Five Million Dollars ($5,000,000), then the Current Inventory
Adjustment Amount shall be zero.


 


“Current Liabilities” means, as of any date,
accounts payable, accrued expenses, deferred revenue and total capital lease
Liabilities, in each case, of the Business as of such date, calculated in
accordance with GAAP consistently applied.


 


“Disclosure Schedule” means the schedules
delivered to Acquirer by or on behalf of the Sellers, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein in connection with the representations and warranties made
by the Sellers in Article II or otherwise.


 


53

















 


“Distribution Agreement” has the meaning
ascribed to it in the Recitals hereto.


 


“Dispute” has the meaning ascribed to it in Section 9.10(a).


 


“Domain Name Assignment” has the meaning
ascribed to it in the Recitals hereto.


 


“Earn-Out Payment” has the meaning ascribed
to it in Section 1.6(c)(iii).


 


“Earn-Out Payment Date” has the meaning
ascribed to it in Section 1.6(c)(iii).


 


“Earn-Out Realization Event” has the meaning
ascribed to it in Section 1.7(b)(iii).


 


“End Date” has the meaning ascribed to it in Section 8.1(b).


 


“Environment” means air, surface water,
ground water, or land, including land surface or subsurface, and any receptors
therein such as persons, wildlife, fish, biota or other natural resources.


 


“Environmental Law” means any applicable
federal, state, local or foreign environmental, health and safety (as such
relates to the Environment) or other Law relating to the regulation of
Hazardous Materials, including the Comprehensive, Environmental Response
Compensation and Liability Act, the Clean Air Act, the Federal Water Pollution
Control Act, the Solid Waste Disposal Act, and the Federal Insecticide,
Fungicide and Rodenticide Act.


 


“Environmental Permit” means any permit,
license, approval, consent or authorization required under or in connection
with any applicable Environmental Law and includes any and all orders, consent
orders or binding agreements issued by or entered into with a Governmental or
Regulatory Authority.


 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder.


 


“Estimated Current Inventory Adjustment Amount”
has the meaning ascribed to it in Section 1.7(a)(i).


 


“Estimated Tangible Net Worth” has the
meaning ascribed to it in Section 1.7(a)(i).


 


“Excess Inventory Value” means, in the event
that inventory included in the Purchased Assets prior to giving effect to any
inventory excluded pursuant to Section 1.2(c) is valued
(calculated in accordance with the Accounting Procedures, including giving
effect to all discounts included therein) at Closing at not less than Thirty
Three Million Dollars ($33,000,000), an amount equal to:  (A)(i) the value (calculated in
accordance with the Accounting Procedures, including giving effect to all
discounts included therein) of the inventory included in the Purchased Assets
at Closing (prior to giving effect to any inventory excluded pursuant to Section 1.2(c))
less (ii) Thirty Three Million Dollars ($33,000,000), multiplied by (B) ninety
percent (90%).  In the event that
inventory included in the Purchased Assets prior to giving effect to any
inventory excluded pursuant to Section 1.2(c) is valued
(calculated in 


 


54

















 


accordance with the
Accounting Procedures, including giving effect to all discounts included
therein) at Closing at less than or equal to Thirty Three Million Dollars
($33,000,000), the Excess Inventory Value shall be equal to zero.


 


“Excluded Assets” has the meaning ascribed to
it in Section 1.3.


 


“Excluded Contracts” has the meaning ascribed
to it in Section 1.3(i).


 


“Excluded Inventory” has the meaning ascribed
to it in Section 1.2(c).


 


“Excluded Liabilities” has the meaning
ascribed to it in Section 1.4(b).


 


“Expiration Date” has the meaning ascribed to
it in Section 6.1.


 


“Export Approvals” has the meaning ascribed
to it in Section 2.21(a).


 


“FCPA” has the meaning ascribed to it in Section 2.22.


 


“Final Current Inventory Adjustment Amount”
has the meaning ascribed to it in Section 1.7(a)(iii).


 


“Final Purchase Price” has the meaning
ascribed to it in Section 1.7(c).


 


“Final Statement” has the meaning ascribed to
it in Section 1.7(a)(iii) and (v).


 


“Final Tangible Net Worth” has the meaning
ascribed to it in Section 1.7(a)(v).


 


“First Subsequent Payment” has the meaning ascribed
to it in Section 1.6(c)(i).


 


“GAAP” means generally accepted accounting
principles in the United States, as in effect from time to time.


 


“Governmental or Regulatory Authority” means
any court, tribunal, arbitrator, authority, agency, bureau, board, commission,
department, official or other instrumentality of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision, and shall include any stock exchange and quotation service.


 


“Gross Revenues” means gross revenues prior
to any deductions for discounts, returns, allowances or other adjustements.


 


“Guaranties” has the meaning ascribed to it
in Section 5.14.


 


“Guarantor” has the meaning ascribed to it in
the preamble hereto.


 


“Hazardous Material” means (a) any
chemical, material, substance or waste containing or constituting petroleum or
petroleum products, solvents (including chlorinated solvents), nuclear or
radioactive materials, asbestos in any form that is or could become friable,
radon, lead-based paint, urea formaldehyde foam insulation or polychlorinated
biphenyls, (b) any chemicals, materials, substances or wastes which are
now defined as or included in the definition 


 


55

















 


of “hazardous substances,” “hazardous
wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted
hazardous wastes,” “toxic substances,” “toxic pollutants” or words of similar
import under any applicable Environmental Law; or (c) any other chemical,
material, substance, pollutant or waste which is regulated as hazardous by any
Governmental or Regulatory Authority under any applicable Environmental Law.


 


“Indebtedness” of any Person means all
obligations of such Person (a) for borrowed money, (b) evidenced by
notes, bonds, debentures or similar instruments, (c) for the deferred
purchase price of goods or services (other than trade payables or accruals
incurred in the ordinary course of business), (d) under capital leases or (e) in
the nature of guarantees of the obligations described in clauses (a) through
(d) above of any other Person.


 


“Indemnified Party” has the meaning ascribed
to it in Section 6.2(d)(i).


 


“Indemnifying Party” has the meaning ascribed
to it in Section 6.2(d)(i).


 


“Insurance Policy” means any public
liability, product liability, general liability, comprehensive, property
damage, vehicle, life, hospital, medical, dental, disability, workers’
compensation, key man, fidelity bond, theft, forgery, errors and omissions,
directors’ and officers’ liability, or other insurance policy of any nature.


 


“Intellectual Property” shall mean all of the
following owned by the Sellers:  (i) registered
and material unregistered trademarks and service marks and trade names, and all
goodwill associated therewith; (ii) patents, patentable inventions and
computer programs (including password unprotected interpretive code or source
code); (iii) trade secrets; (iv) registered and material unregistered
copyrights;  and (v) domain names,
all with the exception of such of the foregoing the absence of which would have
no Material Adverse Effect on the Business.


 


“Investment Assets” means all debentures,
notes and other evidences of Indebtedness, stocks, securities (including rights
to purchase and securities convertible into or exchangeable for other
securities), interests in joint ventures and general and limited partnerships,
mortgage loans and other investment or portfolio assets owned of record or
beneficially by the Sellers.


 


“IRS” means the United States Internal
Revenue Service or any successor entity.


 


“Knowledge” means, as to the Sellers, the
actual knowledge of Don Bucker, Tony Costa, Julie Coughlin, Dan Emerson, or any
executive officer of the Guarantor.


 


“Law” or “Laws” means any law,
statute, order, decree, consent decree, judgment, rule, common law, regulation,
ordinance or other pronouncement having the effect of law whether in the United
States, any foreign country, or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.


 


“Lease Documents” has the meaning ascribed to
it in Section 2.8(b).


 


“Leased Real Property” has the meaning
ascribed to it in Section 2.8(b).


 


56

















 


“Legal Proceeding” means any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental or
Regulatory Authority or any arbitrator or arbitration panel.


 


“Liabilities” means all Indebtedness,
obligations and other liabilities of a Person, whether absolute, accrued,
asserted or unasserted, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, or whether due or to become due.


 


“License” means any Contract that grants a
Person the right to use or otherwise enjoy the benefits of any Intellectual
Property (including any covenants not to sue with respect to any Intellectual
Property).


 


“Liens” means any mortgage, pledge,
assessment, security interest, lease, lien, easement, license, covenant,
condition, restriction, adverse claim, levy, charge, option, equity, adverse
claim or restriction or other encumbrance of any kind, or any conditional sale
Contract, title retention Contract or other Contract to give any of the
foregoing, except for any restrictions on transfer generally arising under any
applicable federal or state securities law.


 


“Loss(es)” means any and all damages, fines,
fees, Taxes, penalties, deficiencies, losses and expenses, including interest,
reasonable expenses of investigation, court costs, reasonable fees and expenses
of attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and
expenses to include all fees and expenses, including fees and expenses of
attorneys incurred in connection with the investigation or defense of any Third
Party Claims), net of any insurance proceeds actually received (without any
adverse effect on the premiums paid for such insurance) or proceeds received by
virtue of third party indemnification.


 


“Material Adverse Effect” means any
circumstance, change, development, condition or event that is materially
adverse to: (a) the financial condition, business or results of operations
of the Business, the Purchased Assets and/or the Assumed Liabilities, taken as
a whole; provided, however,
that “Material Adverse Effect” shall not include the effect of (i) any
circumstance, change, development, condition or event arising out of or
affecting the industry in which the Business operates generally, including
without limitation seasonal changes; (ii) changes in general economic
conditions, interest rates or securities markets in the U.S. or worldwide; (iii) changes
in Law, GAAP or any Orders that apply generally to similarly situated Persons; (iv) any
natural disaster, weather-related events or other acts of God, acts of war or
terrorist activities or any escalation or worsening of any such acts of war or
terrorist activities threatened or underway as of the date of this Agreement; (v) any
circumstance, change, development, condition or event affecting the Purchased
Assets which is cured by the Sellers (including by payment of money) before the
Closing and would not have any continuing material adverse effect; (vi) the
loss of any customer of the Business or a reduction or other changes in the
products purchased or expected to be purchased by any customer of the Business;
or (vii) changes resulting from compliance with the terms and conditions
of this Agreement or from the announcement or pendency of the transactions
contemplated hereby; or (b) the Sellers’ ability to consummate the
transactions contemplated by this Agreement.


 


57

















 


“Material Contracts” has the meaning ascribed
to it in Section 2.11(a).


 


“Net LCM Value of Close Date Inventory” means
the sum of (i) the net realizable value of inventories sold during the 180
day holdback period as measured by the lower of (a) Seller’s average
historical cost or (b) sales price less 5% for hardware sales and 8% for
all other product categories (including bundled products) and (ii) net
realizable value of inventories remaining at the end of the 180 day holdback
period.  Section 1.7(b)(ii) of
the Disclosure Schedule contains an illustration of this calculation and
further definitions, including reserve percentages to be applied to inventories
remaining at the end of the holdback period.


 


“Net Inventory at Time of Close” means the
value of Sellers’ operating inventories included in the Purchased Assets at
historical average cost as of the Closing Date less inventory reserves as
calculated in accordance with the procedures set forth on Section 10(a) of
the Disclosure Schedule.


 


“Notice of Claim” has the meaning ascribed to
it in Section 6.2(d)(i).


 


“Notice Period” has the meaning ascribed to
it in Section 1.7(a)(iii).


 


“Order” means any writ, judgment, decree,
injunction or similar order of any Governmental or Regulatory Authority (in
each such case whether preliminary or final).


 


“Permits” means all licenses, permits,
approvals, authorizations, variances, resale certificates, waivers or consents
issued by a Governmental or Regulatory Authority to the Sellers.


 


“Permitted Liens” means (i) deposits or
pledges made in connection with, or to secure payment of, workers’
compensation, unemployment insurance or similar programs mandated by Law or (ii) possessory
liens on inventory arising in the ordinary course of business in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for labor,
materials or supplies in an aggregate amount not to exceed $5,000 in the
aggregate to Sellers’ Knowledge.


 


“Person” means any natural person,
corporation, general partnership, limited partnership, limited liability
company or partnership, proprietorship, other business organization, trust,
union, association or Governmental or Regulatory Authority.


 


“Personal Information” means any personally
identifiable information relating to the Business that the Sellers are not
authorized to transfer or disclose to the Acquirer pursuant to applicable
Privacy Laws.


 


“Plan” means each employee benefit or compensation
plan, agreement, policy, program or arrangement covering present or former
employees, officers and directors of, and advisors and consultants to, the
Sellers, including but not limited to “employee benefit plans” within the
meaning of section 3(3) of ERISA, stock purchase, stock option or any
other stock-based award, profit sharing, fringe benefit, post-retirement
health, health, life, vision and/or dental insurance coverage (including any
self-insured arrangement), employment, consulting disability benefit,
supplemental unemployment benefit, vacation benefit, change in control, 


 


58

















 


retention, severance, notice
of termination, termination pay, bonus and deferred compensation plans,
agreements or funding arrangements (collectively, the “Plans”), whether
written or oral and whether sponsored, maintained or contributed to by the
Sellers or with respect to which Sellers may have any Liabilities, including
conditional Liabilities.


 


“Post-Closing Tangible Net Worth Statement”
has the meaning ascribed to it in Section 1.7(a)(ii).


 


“Pre-Closing Tax Period” means any taxable
period ending on or before the Closing Date and the portion of a Straddle
Period ending on the Closing Date.


 


“Privacy Laws” means all applicable
international, federal, provincial, state and local laws, rules, regulations
and governmental requirements now or hereafter in effect relating to privacy,
data protection, confidentiality or security of personally identifiable
information.


 


“Property Taxes” means all real property
Taxes, personal property Taxes, intangible property Taxes and similar ad
valorem Taxes.


 


“Purchased Assets” has the meaning ascribed
to it in Section 1.1.


 


“Purchase Price” has the meaning ascribed to
it in Section 1.6(a).


 


“Registered Intellectual Property” shall mean
all United States and international:  (a) patents
and patent applications (including provisional applications); (b) registered
trademarks and service marks, applications to register trademarks and service marks,
intent-to-use applications; (c) registered copyrights and applications for
copyright registration; (d) any mask work registrations and applications
to register mask works; and (e) any other Intellectual Property that is
the subject of an application, certificate, filing, or registration issued by,
filed with, or recorded by, any state, government or other public legal
authority.


 


“Release” means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of a Hazardous Material into the Environment.


 


“Representatives” means, with respect to any
Person, any of its officers, directors, employees, shareholders, attorneys,
accountants, investment advisors, agents, representatives, or Affiliates.


 


“Schedule of Objection” has the meaning
ascribed to it in Section 1.7(b)(ii).


 


“SEC” means the U.S. Securities and Exchange
Commission.


 


“Second Subsequent Payment” has the meaning
ascribed to it in Section 1.6(c)(ii).


 


“Sellers” has the meaning ascribed to it in
the preamble hereto.


 


“Sellers’ Financial Statements” has the
meaning ascribed to it in Section 2.4.


 


59

















 


“Seller Indemnitees” has the meaning ascribed
to it in Section 6.2(b).


 


“Seller Intellectual Property” shall mean any
Intellectual Property that is owned by the Sellers.


 


“Sellers Officers’ Certificate” has the
meaning ascribed to it in Section 7.3(c).


 


“Sellers Registered Intellectual Property”
has the meaning ascribed to it in Section 2.10.


 


“Sellers Secretary’s Certificate” has the
meaning ascribed to it in Section 7.3(c).


 


“Specified Representations” shall mean the
representations and warranties of the Sellers set forth in Sections 2.2,
2.3, 2.7(a)(i), 2.7(a)(ii), 2.7(a)(vii), 2.7(b),
2.9(a), 2.11(a)(ii), 2.11(a)(xii)(A), 2.11(a)(xii)(B),
2.11(d), 2.15 (solely as updated by revised Section 2.15(a) of
the Disclosure Schedule delivered within five Business Days of the Closing
Date), 2.16 (solely as updated by revised Section 2.16(a) of
the Disclosure Schedule delivered within five Business Days of the Closing
Date) and 2.26(b).


 


“Statement” has the meaning ascribed to in Section 1.7(a)(ii).


 


“Statement of Objections” has the meaning
ascribed to it in Section 1.7(a)(iii).


 


“Straddle Period” means any taxable period
which begins on or before and ends after the Closing Date.


 


“Sublease” has the meaning ascribed to it in
the Recitals hereto.


 


“Subleased Property” means the facility
located at 9271 Meridian Way, West Chester, Ohio 45069.


 


“Subsequent Payments” has the meaning
ascribed to it in Section 1.6(c).


 


“Subsequent Payment Date” has the meaning
ascribed to it in Section 1.6(c).


 


“Subsidiary” means any Person in which the
Sellers, directly or indirectly through subsidiaries or otherwise, beneficially
owns at least a majority of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof.


 


“Takeover Statute” means a “fair price,” “moratorium,”
“control share acquisition” or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States, including Section 203
of the Delaware General Corporation Law and Section 912 of the New York
Business Corporation Law.


 


“Take-Two Products” has the meaning ascribed
to it in the Distribution Agreement.


 


“Take-Two Product Revenue” has the meaning
ascribed to it in Section 1.7(b)(iii).


 


60
















 


“Tangible
Net Worth” means (i) the value of Sellers’ accounts receivable (but
not including any accounts receivable that are excluded by the Sellers pursuant
to Section 1.2(b), net of reserves plus inventory included within
the Purchased Assets after giving effect to Section 1.2(c), net of
reserves plus prepaid expenses plus fixed assets, net, less (ii) the value
of US Seller’s accounts payable and accrued expenses (other than accounts
payable and accrued expenses relating to the US Seller’s third party PC
distribution business and each as measured as of the Closing Date in accordance
with the Accounting Procedures and consistent with past practices).  Section 1.7(a)(i) of the Disclosure
Schedule includes an example of the calculation of Tangible Net Worth as of October 31,
2009, and is provided for illustrative purposes only.  The parties hereto agree that Section 1.7(a)(i) of
the Disclosure Schedule appropriately applies the calculation of Tangible Net
Worth as set forth in this Agreement.


 


“Target
Tangible Net Worth” has the meaning ascribed to it in Section 1.7(a)(i).


 


“Taxes”
means all taxes, however denominated, including any interest, penalties or
other additions to tax that may become payable in respect thereof, (a) imposed
by any federal, territorial, state, local or foreign government or any agency
or political subdivision of any such government, which taxes shall include,
without limiting the generality of the foregoing, all income or profits taxes
(including but not limited to, federal, state and foreign income taxes),
payroll and employee withholding taxes, unemployment insurance contributions,
social security taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, withholding taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes, environmental
taxes, transfer taxes, workers’ compensation, Pension Benefit Guaranty
Corporation premiums and other governmental charges, and other obligations of
the same or of a similar nature to any of the foregoing, which are required to
be paid, withheld or collected, (b) any liability for the payment of
amounts referred to in (a) as a result of being a member of any
affiliated, consolidated, combined or unitary group, or (c) any liability
for amounts referred to in (a) or (b) as a result of any obligations
to indemnify another person or as a result of being a successor in interest or
transferee of another person.


 


“Tax
Returns” means all reports, estimates, declarations of estimated tax,
information statements and returns required to be filed in connection with any
Taxes, including information returns with respect to backup withholding and
other payments to third parties.


 


“Third
Party Claim” has the meaning ascribed to it in Section 6.2(d)(i).


 


“Third
Party Expenses” has the meaning ascribed to it in Section 5.6.


 


“Trademark
Assignment” has the meaning ascribed to it in the Recitals hereto.


 


“Transferred
Employees” shall mean the US Transferred Employees and the Canadian
Transferred Employees.


 


“Transferred
Insurance Policies” has the meaning ascribed to it in Section 1.1(i).


 


“Transition
Services Agreement” has the meaning ascribed to it in the Recitals hereto.


 


61

















 


“Uncollected
Amount” has the meaning ascribed to it in Section 1.7(b)(i).


 


“Uncollectible”
shall mean, with respect to any accounts receivable, such receivable that is
more than 120 days past due or is owed by a counterparty that has been declared
insolvent or bankrupt, or where a petition in bankruptcy or any petition or
answer seeking an assignment for the benefit of creditors, or seeking a
liquidation or dissolution or similar relief under the U.S. Bankruptcy Code or
any state law is filed by or against such party.


 


“Unresolved
Debit Memos” shall mean the aggregate amount by which (i) the debit
memos related to price protection, retail programs or vendor chargebacks to the
vendors (offset by any provision for unresolved debit memos) included in the
calculation of the Final Tangible Net Worth exceeds (ii) the actual
aggregate amounts that were (1) paid by vendors to Acquirer, and/or (2) offset
against accounts payable by Acquirer.


 


“US
Business” has the meaning ascribed to it in the Recitals hereto.


 


“US
Seller” has the meaning ascribed to it in the Preamble hereto.


 


“US
Transferred Employees” has the meaning ascribed to it in Section 5.11(a)(i).


 


[Signature Page Follows]


 


62

















 


IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by
their duly authorized representatives, all as of the date first written above.


 


	
   

  	
  SYNNEX
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Simon Y. Leung

  
	
   

  	
   

  	
  Name:  Simon
  Y. Leung

  
	
   

  	
   

  	
  Title:  General
  Counsel and Corporate Secretary 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JACK
  OF ALL GAMES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lainie Goldstein

  
	
   

  	
   

  	
  Name:  Lainie
  Goldstein

  
	
   

  	
   

  	
  Title:  Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JACK
  OF ALL GAMES (CANADA), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Daniel P. Emerson

  
	
   

  	
   

  	
  Name:  Daniel
  P. Emerson

  
	
   

  	
   

  	
  Title:  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Solely
  for purposes of Section 9.2:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TAKE-TWO
  INTERACTIVE

  
	
   

  	
  SOFTWARE,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Karl Slatoff

  
	
   

  	
   

  	
  Name:  Karl
  Slatoff

  
	
   

  	
   

  	
  Title:  Executive Vice President

  



 


[Signature Page to
Asset Purchase Agreement]